Most vendors do not know what their property is worth. They may form an opinion based on what they see selling locally (adding a bit because their property is naturally better), but usually they rely on agents.
That’s a problem, because if you quote prices accurately but a competitor quotes higher, chances are you’ll lose the listing. The other agent loses too, through damage to their reputation from lying or appearing incompetent when the property doesn’t sell at the inflated price.
Most of all, the vendor loses, because their property will take a lot longer to sell than it should. Statistics show that vendors usually end up with less money by starting marketing at a higher price than they should have received if they had started marketing at a realistic price.
So what can you do to secure a listing at a readily sellable price?
The answer is that the vendor must be led to understand the correct value of their property and the dangers to them of overpricing. The strategy is as follows:
- Bring a list of five or six genuinely comparable sales to the appraisal.
- Take a sheet of paper drawn up with four column headings:
- Sit down with the vendor, and in the first row, put in the Price, Address and Description of a similar, but significantly cheaper property.
- Ask the vendor to tell you if it’s Better or Worse than theirs – naturally, they will tell you theirs is better. Agree, and write that in the final column.
- Repeat the exercise with more valuable properties in ascending price order (i.e. cheapest to most expensive). Each time, have the vendor tell you how their property compares.
- Soon you will reach properties that are clearly better than your vendor’s property.
At this point, the vendor has established in their own mind the correct price range. If another agent tries to “buy the listing” with a higher price, they will be shot down. Now you and the vendor can concentrate on how to present and market the property to obtain the best price.
Vendor comments in red. The vendor should conclude their property is worth approximately $410,000 to $420,000.
This technique is used dynamically and electronically in our fantastic new rp.lister iPad application, downloadable from the Apple App Store this week.
If you need a quick and easy way to find some comparable sales to try out this technique, why not try an RP Data Comparative Market Analysis (CMA) report, which you can access now via RP Professional? For more information, take a look at our Tutorial Video or book online or classroom training today.