How to have the tough conversation when sellers are overvaluing their home
As a real estate agent, you’ve probably met all kinds of objections from sellers about the listing price of their home. Sellers, after all, want to sell for the highest amount possible.
Some sellers become sentimentally attached to their home and think it should be worth much more than it is.
Some sellers have heard tales of hot real estate markets and have high expectations, which are often met with disappointment.
Others might have their eye on a certain price so they can buy a new home.
Regardless of the objection, there are always ways for agents to overcome them. Here are seven ways to overcome seller pricing objections.
1. Be transparent about how you priced the house
Nothing works to resolve seller pricing objections like being transparent and open about how the house is priced and why you priced it the way you did. Show them your comparative market analysis (CMA).
They may be working with data pulled from the web for similar houses or data from their neighbor’s sale last year. Either of these could be outdated or not applicable to their specific house. Have a clear discussion about why those numbers don’t work.
2. Explain the importance of correct pricing in time to sale
Pricing a home correctly is key to getting a sale as quickly as possible. Sellers who want to list their home too aggressively might be hurting their chances for a sale altogether.
Houses for sale should sell as quickly as possible. Housing that sits on the market past a month in an average or hot market could attract prospective buyers who want a lower price, and sellers lose out. Why? Because potential buyers — and their agents — will be aware that it is not moving and use it as leverage to get a good deal.
If a home sits on the market through an entire summer, the seller might lose the chance to sell that year. This opens up the possibility of the market for the home becoming weaker over the course of time.
3. Be proactive
Always be proactive in your dealings with the sellers. Call them every week to keep them apprised of market conditions. Tell them what’s moving and what’s not.
If they are uncertain about your knowledge of the market, this will help assuage their worries.
4. Explain the absorption rate
Many sellers in a hot real estate market want to price their home aggressively. But your pricing also depends on the absorption rate.
There has to be a sufficient amount of people looking and able to afford real estate prices for every available piece of inventory to sell. Explaining the absorption rate will make the sales price decisions more understandable.
5. Ask the sellers to explain their thinking on price
Sometimes, sellers have specific prices in mind. They can be dismayed when those pricing ideas meet realistic pricing if there is a wide discrepancy. Ask open-ended questions to determine what their thinking on the price was. Then, transparently explain how their thinking needs adjustment.
A popular thought process with sellers is that if they make a renovation, they can just add that price onto the cost of the home.
For example, they may have thought to make their home more eco-friendly by replacing an old toilet with a high-efficiency toilet, which generally use 1.28 gallons (or less) a flush.
More realistically, this kind of improvement probably brought the house up to market price rather than having to be priced below it. Tactfully explain that.
6. Explain a prospective buyer’s perspective
It’s a good idea to counter any seller’s objections to pricing by explaining the buyers’ point of view.
If the home will likely need repair or renovation from the buyer, for example, the home needs to be priced to accommodate those costs. Otherwise, the home may become unattractive to buyers.
Explain to the seller that buyers may be leery or scared away completely by the idea of having to repair or renovate a house. Factor in potential costs and potential disruption from the buyers’ perspective.
Sellers whose homes need repair or renovation may need to prepare for the idea of sweetening the buyers’ deal by pricing realistically.
7. Provide an overview of coming trends
Keep sellers apprised of coming trends that may affect seller pricing as well. Sellers need to be aware of multiple factors that may affect demand for their homes, which can change over time.
Rising mortgage rates, for example, may make buyers less abundant and may price certain prospective buyers out of some markets. Similarly, the change in tax deductions for property taxes may make some larger or more expensive homes less attractive to buyers.
Both these factors may motivate sellers to withdraw objections in an attempt to get their homes sold as promptly as possible.
Seller pricing objections are a normal and expectable part of doing business. With these seven strategies, however, you can serve your clients well, overcome their objectives and allow them to sell their homes as quickly and optimally as possible.
Megan Wild is the editor of Your Wild Home in Philadelphia.