Here's a great article I came across to share with you!!
6 strategies for a realistic asking price
By Bernice Ross, Thursday, July 15, 2010, INMAN NEWS
(Comments in Italics have been added)
You've done a thorough CMA (comparative market analysis) and you're certain that the sellers will see the truth about where they should price their property. After they review your work they say, "But our house is worth more!" (How many times have you heard that one?????)
One of the greatest challenges that agents face is getting sellers to be realistic about their asking price. If you're struggling with pricing your listings right, here are six strategies that can help you persuade your sellers to be realistic.
1. Odds of selling (absorption rates)
Absorption rates are generally one of the most powerful ways to persuade sellers to be realistic. The calculation is relatively simple. In most areas, your local multiple listing service publishes how many months of inventory are currently on the market.
Next, divide "1" by the number of months of inventory. This gives you the percentage of listings that are selling each month. It also tells you the seller's odds of selling in a given month. For example, if there are 12 months of inventory on the market, that means that the seller's odds or probability of selling in any month is 8.3 percent (1/12). The probability the seller won't sell in a given month is 91.7 percent (11/12). (Give the bad news first and let it sink in...)
2. Holding costs
Another approach is to show the seller the cost of waiting to sell, especially if there has been a decline in prices. For example, assume that a property is worth $240,000 and the property values over the last 12 months have declined by 10 percent ($24,000.) If the seller's mortgage payments, taxes and insurance run $2,000 per month, each month the seller waits to sell costs them the holding costs (i.e., $2,000) PLUS the rate of price depreciation.
In this example, that's another $2,000 per month ($24,000 ÷ 12 = $2,000). Consequently, each month the seller stays on the market costs them an additional $4,000. (No one ever thinks of it in these terms.)
3. Price per square foot CMA
A third strategy is to use a price-per-square-foot analysis. Sellers are generally prepared to have a conversation about the current list prices. What most are not prepared to do is to discuss how much properties are selling for on a price-per-square-foot basis. Many multiple listing services provide price-per-square-foot data. (If this number is not available, simply take the price each comparable sale sold at and divide it by the number of square feet in the improvements.)
When you discuss the information with the seller, use the price per square foot based upon the selling price, not the list price. When you ask the seller where they would like to price their property based upon the price per square foot, you will often obtain a more realistic asking price. (Great line - "Let's walk through your home together and you point out the things that make your home worth $20 a square foot more than anyone else on the market."
4. What properties have "qualified for" in your area
This is a powerful approach, especially when used with a price-per-square-foot CMA. The argument is simple.
"Mr. and Mrs. Seller, you already know that in order to sell your house, you need a qualified buyer, right? Did you also know that your house has to qualify?"
Most sellers will ask you what this means.
"Since most buyers need a loan to purchase, this means that your house will have to qualify for a loan with a lender. To determine where to position your property in the market, let's take a look at what other properties are qualifying for in your area."
You then review the CMA data for closed sales on a price-per-square-foot basis. Properties that have closed "have qualified." Because you are using closed sales to set the price, you are much more likely to obtain a realistically priced listing. (This is what the appraisal does for the bank...it qualifies the property)
5. Show them the comparable sales in person or online
If you don't own a laptop, you can always take your sellers out to look at the current inventory in person. However, this is time-consuming. The good news is that with all the great Web tools available, you no longer have to chauffeur them around. Instead, provide them with a virtual tour of the comparable sales. (This is a great strategy...Create your own virtual tour video with all the sold homes in the area with words on the pictures that have the price per square foot on them. Very powerful! Let me know if you need help with this)
This is especially helpful when the sellers don't feel they need to paint or get rid of the clutter. Showing them the videos or the interior photos of the most recent comparable sales is a smart way to educate them about what is required to get their property sold.
6. Use online pricing tools
Although you may not love Zillow or some of the other online pricing tools, they can be powerful tools to help sellers be realistic about their prices. Because the information comes from a third party rather than a real estate company or agent, many sellers are more likely to believe this data is correct.
Sometimes sellers simply won't be persuaded by any argument that you make. When this occurs, the best policy is to thank them for their time and to walk away. There's no point in be saddled with a listing that won't sell -- or even if it did, won't appraise. Save yourself the time, effort and frustration of having to market an overpriced listing.
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