Sellers’ inclination to overprice their homes can seem as formidable and ever-present as gravity or any other law of nature. In some ways, it is the most natural thing ever – everyone wants to maximize the value of their possessions, especially when it comes to their largest assets.
But because overpricing can be so deadly to sellers’ ultimate goals, it’s our responsibility to leverage every strategy at our disposal to vividly paint the picture of how dangerous and counterproductive overpricing truly is, before they experience the pain and expense of a listing that won’t sell. Here’s how:
1. Show the list price of the lagging pending vs. the list price of the quick/solds.
When we pull comps, we often focus on the Sold properties, and their list vs. sale prices. If we can get some information from insiders about the pending comparable homes, that’s also useful – sometimes even more useful than the Solds. While many agents take a glance at the Active homes just to get a sense for the competition, when your Seller client is in danger of overpricing, it is worth scrutinizing the Actives more intensely.
You might be inclined to weed out Active comps that are clearly overpriced to stop your client from construing them as indicating the right price range for your home. I argue that we should be doing the exact opposite: look and see whether there are Active comps for your client’s home which have lagged on the market for a much longer time than the average DOM for the pending and solds in the area and seem to be significantly overpriced – maybe even falling into the same range as your client would like to list theirs. If you can find even one or two such overpriced, lagging outliers, consider showing them to your Seller as powerful examples of why they should not to list that price range.
2. Deep dive into the “slow” Sold comparables.
As you’re exploring the comps, spend some time talking your seller through another frequently overlooked subset of properties: those that sold, but sold very slowly when compared with the average number of days a home in your area stays on the market.
Often, these “slow” Solds will have been overpriced and will have sold way below asking – even below their reduced price. Pinpointing the:
- original list price,
- list price at the time the home went off the market,
- sold price and
- number of Days on Market (DOM)
on even a few slow Solds can paint a vivid picture of the path of an overpriced home in a seller’s mind, very efficiently.
And the opposite is true: if you can find a few examples of Sold comparables which were listed low and sold high, those two types of examples, together, make the picture even more powerful.
3. Help your seller see what buyers will see, online.
Visit your local Board or MLS’s website and get a read on how many homes in your area sell in the price range/bracket your seller wants to list at, versus how many sell in the price range you’re recommending. Say, for example, your client wants to list at $415,000 and you think the home would do better at $385,000. If there were 200 homes sold last quarter at $350,000-$400,000 and only 75 sold between $400,000-$450,000, chances are great that buyers in your area are much more likely to be conducting their online home searches in the sub-$400,000 range, statistically speaking.
You know the rest: the more buyer search results the listing falls into, the more buyers will want to view the place – and the more viewings you get, the better the chances of getting an offer.
Additionally, take the opportunity before the list price is set in stone to sit down with your seller and slip on the virtual shoes of the average buyer you’ll want to court for their home. Run online searches at several different price points – including the one the seller believes in and the one you are recommending – to see what the competition looks like online, and how the seller’s home will measure up against the other in terms of the specs buyers use to pick the homes they want to see in person (e.g., beds, baths, square feet, location).
The two-part goal, as you discuss it with your seller, should be to list the property at a price point which:
(a) falls into the broadest possible bucket of online searchers and
(b) makes every buyer who sees it in the context of the other homes in the same price bracket put your seller’s home at the top of the list of places they want to view.
4. Take the seller on a tour of competitive properties.
In some situations, the specs of the comps simply don’t make it crystal clear that a seller’s home would be overpriced. This happens most often when a property’s condition or location pale in comparison to the competition. In these instances, when you feel strongly about your pricing recommendation, consider taking your seller on a short tour of the competition – physically taking them to view competitive properties, in real life.
Show your Seller what their home will be up against, by touring them through one or two of each of the following:
- homes in the price range they want, in their neighborhood
- homes in the price range they want, in other parts of town which buyers will likely also be considering
- homes in your recommended price range, to show how their home is poised to compete well against these properties.
Showing your Seller the competition in real life can also be a powerful segue to a conversation around property preparation. If you think your Seller’s home would be fairly priced at the range they want to target with $25,000 in improvements, show them the homes which have the improvements you suggest and are listed/selling at their desired price point . That puts the Seller in the driver’s seat on how to proceed: invest some dough, or price it more appropriately.
5. Be strategic with your past client references.
If you know a particular seller-to-be is fixated on a too-high price, be strategic with the past client references you give them. Ideally, you want to connect them with past seller clients who were similarly situated to where they are now; people who are highly likely to do two things:
- Share relatable experiences about their own thoughts and actions from property preparation through close of escrow, painting a positive picture of the ultimate outcome they had working with you; and
- Discuss their experience setting – and later, lowering – their home’s list price, as follows: “We were wrong. Your name here was right. And we could have saved ourselves a lot of stress if we’d listened to your name here from the beginning.”
Other sellers who have been in precisely the same spot as your current client have a level of credibility in vouching for your pricing skills that you can simply not ever have or get in talking about yourself. Having come out the other end of escrow with a favorable result, they can also talk to the overall legitimacy and soundness of your professional advice, and can do the heavy lifting when it comes to countering every Seller’s fear: that their agent is suggesting a lower price just to make their own job of getting the place sold easier.
As you can see, there are themes here to the categories of overpricing pitfalls you’ll want to illustrate for your seller – it poses the dangers of: making a home lag on the market; eventual, painful price cuts and excruciating lowball offers. The worst danger? Many overpriced homes simply don’t sell at all. But before they fail to sell, they suck up just as much time, energy and cash in preparation and marketing as right-priced homes, causing an above-average amount of woe, hand-wringing and sleepless nights for both agent and seller.
It might seem time-consuming, but pulling out all the stops to prove the hazards of overpricing in advance saves everyone, in the long run.