I see many posts about listing prices and overpriced houses with pricing driven by sellers. It makes me think of the discussions we have in our office about our potential clients. That discussion centers on Price vs Cost. In some industries, this is a common discussion for sales folks.
Price - The Amount of Money Exchanged at a Single Point in Time.
Cost - The Amount of Money Spent Over a Period of Time.
Let's take a simple topic first that is on everyone's mind. Gasoline. We may know of a gas station that is 20 miles away with gasoline that is a nickel a gallon cheaper.
Yet few people (although some are out there) will spend 45 minutes and 40 miles driving round-trip to save a nickel a gallon. Why not? While the price is cheaper, the cost is not. So we know for small dollar amounts, most people get the concept. And people are not emotionally attached to their gasoline.
Now let's look at houses or property. People talk about the list price of a house or the offered price or even the final, agreed price. Many people are focused on this specific number with total disregard for how much they will spend in the coming days working on (or waiting for) a deal as a buyer or seller.
The important thing to discuss with a buyer or seller of any item or service is the COST!
Let's take a house for example. Mr. House Seller can price his house $20,000 too high for the neighborhood or market or city or whatever. You as a professional know this but some agents will even cooperate with this high pricing (we can discuss why they do this another time).
But what is the cost for this high price? Likely it will be additional months of mortgage payments, additional time to keep the house ready to show, additional maintenance, additional marketing time and effort by Mr. Seller and the agent. Cost to the seller and cost to the agent.
TRY THIS...
When you have someone fixated on a price, you say you will agree to the price if they will agree to the cost.
They'll be puzzled.
You write down the price, then write down all the associated costs in both a best case and worst case scenario. Then take the average (which is more likely) and see if they will sign off that the cost is acceptable. If not, you go back and work on the price and repeat the process.
This process can work with buyers and Sellers. For buyers, get them to list the value of their time shopping, the gas, the costs of their current rent perhaps, the cost of looking at houses that don't meet their "got to have" list (You do have their "got to have" list, right? Without this, you waste time looking at things they'll never buy).
This is not about educating the buyer or seller. It is about helping them see what they are really doing. The list or offer price, that is just a starting point.
The COST is where the MONEY is!
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