As a realtor, you know that property price determines the level of interest in a property you're selling. From the number of showings, to the number and quality of offers, to the way clients rate your services, price is key. Unfortunately, it is also something about which clients have very strong opinions—understandably so. They want a price that nets them the right amount of money, reflects improvements they've made, and captures some of their nostalgia for the home. It is incumbent on you as the real estate agent to walk the difficult line between pleasing the seller and setting a price that reflects true market conditions. This article teaches you how to set a price that reflects real-time, location-specific market realities while still catering to your clients, using Keller Williams real estate agent and ActiveRain owner Ben Kinney's pricing strategy.*
The Problem: Inconsistent pricing strategies
Implementing a fact-based pricing strategy addresses several challenges that realtors face:
- Realtors list a property at the highest price possible to please the seller
- Sellers argue that the price is too low (or doesn't reflect the amenities and features)
- Banks won't loan on a price set higher than the appraised value
The Solution: Ben Kinney's 5-5-5 strategy
A successful pricing strategy is Ben Kinney's 5-5-5. By identifying 5 comparable active properties, 5 comparable pending properties, and 5 comparable sold properties, the pricing will be accurate.
Step One: Pick comparables
Be sure to pick comparable properties that have the same features, lot size, and square footage, that are located in the same area:
- 5 Actives
- 5 Pendings
- 5 Solds
Step Two: Bracket the price
- Find comps that match the lower price
- Find comps that match the higher price
- Pick a range inside which you're willing to list the home
- Pick a goal price you feel is appropriate
- Pick a price that you wouldn't go above
Step Three: Show sellers the bracket during the listings presentation (but not the actual price)
Put the comparable properties in front of the sellers and let them pick the price.
Brivity CMA automates the 5-5-5 strategy, setting up bracketed pricing based on actual active, pending and sold properties, rather than a pre-written price.
If you show them the facts, they can't argue. Facts take emotion out of the discussion. This puts the responsibility on the seller to identify the price.
Why the 5-5-5? What to say to sellers about pricing
Remember, the goal here isn't to tell sellers their home is worth the highest price possible. It's to tell them the truth.
Ben Kinney's Pricing Script
To the seller:
"I'd like to share a strategy that allows both you and me to figure out how to price the property because I need to sell the property three times. Number 1 - I have to sell it once to an agent so they'll show it to their buyers, because 86% of sellers are represented by real estate agents. Number 2 - I have to sell it to the buyer to get them to write an offer. Number 3 - I need to sell it to the bank, and the bank's appraisers to get them to give a loan on the property.
Since it has to be sold so many times to so many people, you have to use the same data that all those people use when getting a home price. And the appraisers, the banks, the agents, and the buyers use active home listings, pending home listings, sold home listings. This is why we developed the '555' that allows us to accurately price a property by picking out 5 comparable active properties, 5 comparable pending properties, and 5 comparable sold properties.
These properties together create a bracket. The bracket is the highest price you'd consider selling your home for and how many days on market that that will take. You might be able to price your property 5% higher, but it could then take you a year to do it. Or, the lowest possible price for your home might sell in a day. We need to pick where in the range you'd like your home sold. Does this sound like a good way to price your home?"
By using the 5-5-5 strategy, you use the data to tell the price, which takes the emotion out of the equation and keeps potential sellers from being offended. With 5-5-5, you're using the same method as successful ActiveRain Owner and real estate agent Ben Kinney. This will get you more offers and ultimately allow you to sell more properties.
*Who is Ben Kinney?
Ben Kinney is a nationally-known entrepreneur, professional speaker, trainer, author and real estate agent. He is the author of Soci@l; is listed in The Wall Street Journal and REAL Trends Top 100 agents for both total units sold and total sales volume in the nation; and was named "Innovator of the Year" by Inman News. The Ben Kinney Companies includes 1000+ agents in nine Keller Williams brokerages spanning from Bellingham, Washington to Austin, Texas and across the pond to London, England; a collection of real estate-related software companies, including ActiveRain, Kwkly, Brivity and Blossor; and the Ben Kinney Training Organization.
Ben's newest product, Brivity Platform, connets all of your Brivity systems and other industry tools into one platform, so you only have to pay for one bill. Brivity Platform, the only system that guarantees success in real estate. Sign up for a demo here!