The Real Estate Market Has Changed: Your pricing strategy needs to be spot on. The key to a successful list price is “Relevant Pricing” by removing wiggle room.
August 24, 2022 By: Keith Robert Gordon
asked questions all the time from home sellers once listed in the MLS about
showings and offers. If a home seller is not getting enough showings or offers
the seller wonders what they should do next. Now that home sales and prices may
have turned back to a normal real estate market it’s time for a new plan. Or
should I say, bring out the old playbook that I have successfully used for decades.
Home prices weren’t much of a concern to
buyers during the first and second quarters of 2022. Now that things are
different following a 3.5% jump in interest rates, home sellers and listing
agents need to recalibrate their strategies.
The bottom line is we are back to a normal
pricing model where everything matters: By “everything,” I mean price.
of this change in market conditions, I now get asked by home sellers if
increasing their list price will generate more serious offers. They also
frequently ask me if showings will pick up after a holiday weekend such as the
Fourth of July. Of course, we all are searching for the right answers.
In this Altru Realty blog I explore two negotiating
concepts that may help home sellers get their list price right and if overpriced,
how they should view a change in price. One concept is called “Trusting Buyers”
and the other is “Relevant Pricing.” They go hand in hand.
I have learned after selling some 4500 homes is a listing agent should not tell
a seller what to do. In other words, sure I know how to sell a home in 20 days’
time for its highest value but that doesn’t mean the homeowner is necessarily
ready to sell or wants my advice at that very moment. My approach to
communicating with sellers has changed over time. I now use plenty of compassion
when asking the homeowner how they feel about their current or proposed list
price or changes to their list price. I want sellers on board. I want them to conclude
what is best for them, not what I think is best for them or my company coffers.
Getting a seller under contract in essence is really a personal thing.
The message here for listing agents is while
it is true that your broker technically owns the listing it is equally true is no
broker or Realtor owns the home we are selling. Only the homeowner oversees their
own motivation and the price they feel comfortable with. Their motivation to
sell at a certain price may come down to not having the time, energy or
emotional fortitude to pack and move. It could be that their timing to move is
dependent on another event that you have no idea about such as an infirmed
parent in another town or a lease on a second property they own. So many
variables to consider. And yes, it could be just about getting more money for
the home but that too is a personal choice of the seller. All cases, no sales
pitch can overcome that need.
point here for listing agents is just let the seller call the shots about when
they are ready lower their price and sell. I have found having compassion for
sellers is the most important element to being a professional listing agent.
mission is to be available, helpful, accurate, skillful, honest, and ready to negotiate
and give advice that works for them not me.
That said there is only one highly qualified
group of people that really know the true value of any home. Listing agents are
employed to prove the value of a home which is a process of knowing beyond any
doubt that the highest buyer was identified. And getting more than one offer is
paramount to proving a high value sale.
I have an expression that doesn’t always go
over well with sellers which is a concept called Trusting Buyers. It seems so
odd that Trusting Buyers with your important home sale is exactly what needs to
be done to generate the highest sale possible. But it is so true.
Nothing is more obvious to me about
understanding this concept than looking back at what happened the past 12
months ending June 2022 where buyers pushed home values higher and higher until
the Fed got it their way and finally stopped the insanity. This is what I am
talking about. Those buyers fought tooth and nail to win the bid, often waving
appraisals and inspections. So, the concept of Trusting Buyers was on full
display. Sellers were forced to Trust Buyers because they had had no choice about
it: get listed and stand back regardless of the list price. Buyers just fought
to win the bid. But, in a normal market this doesn’t happen the same way. It’s slightly
different. The concept of Trusting Buyers means it is always buyers that drive
up prices or determine the final value whether a pandemic driven mania or a
common pre-pandemic bidding war.
This latest phenomenon was a once in century
event with interest rates under 3%, the market flooded with government cash,
investors buying as much as 20% of the market while fighting alongside RIETs,
flippers and oh yes, the basic homeowner. Not to mention the pandemic work for
home thing. A perfect storm for a mammoth bidding war. But here is my point of
this blog. My Pro Team at Altru Realty has been creating mini-bidding wars
since 2012—well before this latest home buying craze. The concept is the same
In a stable market, when a homeowner lists
with a Realtor, they typically add 10% wiggle room
expecting a negotiating battle or possibly just being misled by an overly anxious
listing agent saying things that may not be true to win the listing. Regardless
of how that price was established the agent and homeowner fully intends on a
sale lower than the list price. Of course, the backdrop is no one ever pays the
“list” which is not true of course and part of the reason why the excessive
wiggle room was added in the first place. In the end, after possibly after
several price adjustments most listings sell 3% under list. This means the 10%
over-priced sellers need to drop at least 7% to get an offer. This is so
because buyers will offer 6% under a list price that is 3% over market value to
meet that seller in the middle. That is the math that is important here. If
listed 10% over the market the buyers will seldom offer 20% under list to meet the
seller in the middle at their “buy value.” Have you ever seen a property on the
market for 100 days? Possibly 200 days. After 30 days on the market, it may be
a forgone conclusion that the home is overpriced by at least 7%.
already discussed Trusting Buyers which means it’s up to buyers to make offers
and chase a property: not the seller or the listing agent to cajole them into
making an offer by giving away a seller’s motivation, rotating pictures,
changing the property description, or increasing the offered commission to
buyer’s agents. These buyers have all the data on their phones and get
real-time alerts. They have the same data as agents do!
The other key to a successful list price is
“Relevant Pricing.” This means removing the 10% added wiggle room in your list
price and creating your own bidding war. The buyers will make full price offers
because all the other comparable listings are priced 10% higher. Your listing
becomes the only game in town. It’s “relevant” to the buyers. That is also why
buyers don’t walk away from their offers. They have nowhere to go.
But you must first trust that buyers are
really your best friends to find a full value home sale. You need them. You
need all of them—not just one outlier lowball offer. If a homeowner were to
list at a value where most buyers would offer full price, then the two best
buyers will always fight it out to achieve a high value sale for the seller often
above the list price: and getting more favorable contract terms such as
appraisal gap insurance.
As a side note, a seller doesn’t have to take
a full price offer once presented. Our approach to finding value does involve
waiting as much as 20 days seeking many offers. This also means the “time to
accept deadline” of the offer is removed from our thoughts. It is not relevant.
When following this negotiating practice there is only one mission which
is proving the value of the home. It is a patient, thoughtful and exact
hope this explains why buyers are always perfect. It’s a perfect market too. A
market where a seller’s list price attracts buyers, or not, and the most eager
buyer wins the bid.
reason these two concepts work so well is once a buyer finally finds their
perfect home, they will offer their max just to end their miserably long and
frustrating home buying process. They are very exhausted!
Keith Robert Gordon