The Real Estate Law Podcast

10 - Proven Pricing Strategy for Selling Real Estate

April 26, 2021 Jason Muth + Rory Gill Season 1 Episode 10
The Real Estate Law Podcast
10 - Proven Pricing Strategy for Selling Real Estate
Show Notes Transcript

In this episode, we're continuing our conversation about pricing strategy and how to price your home for the optimal sale price.

If you're selling your home, you're going to want to nail the listing price when you first hit the market. The goal is to price it correctly - not too high that you'll need to make future price reductions, but not too low that you'll wonder if you made a mistake.

Even in an overheated real estate market - where properties receive multiple offers before the Open House - pricing strategy is critical.

Ideally, you'll drive competition, receive multiple offers quickly, and be in control of the entire process.

Join Jason Muth and Attorney / Broker Rory Gill of NextHome Titletown and UrbanVillage Legal in Boston, Massachusetts for another episode of The Real Estate Law Podcast! 

Support the show (https://www.urbanvillagelegal.com)

Speaker 1:

And there are three general strategies with this, this part isn't really rocket science, but we could list the property for less than what we think is worth. We could list it for more than what we think it's worth, or he listens for exactly what we think it's worth.

Speaker 2:

You found the real estate law podcast because real estate is more than just pretty pictures. And law goes well beyond paperwork and courtroom argument . If you're a real estate professional, looking to build real estate expertise, then welcome to the conversation and discover more@realestatelawpodcast.com.

Speaker 1:

Welcome to the real estate law podcast. My name is Jason Meuth and we're here with real estate attorney real estate broker owner of next home. Titletown real estate here in Boston, Rory Gill , April already . Hi Jason. I missed you. Yes, exactly. We feel like we just recorded one of you . I feel like. So to camera, I didn't even do a wardrobe change, but well , um , you didn't, but you know, you're, you're all dressed up today. I mean, some people are listening to this , uh, through iTunes or whatever podcast platform. Uh , they prefer some people are watching this on YouTube cause we're now recording video versions of it. Uh, and you're decked out in a suit and tie today, which is very typical for post COVID work couture. Right. So I mean, well, as we, as we get back to normal, we have to start dressing like normal again. So, you know, we can't do everything with sweatpants . I feel like that's going to be a whole nother topic as well though. Like, I mean, I think that we've gone, you know , beyond the Brooks brothers suits or Hugo boss or whatnot . I mean, yeah, people want to get dressed to the nines, but I think there's gonna be a lot more business casual than, than we even expect. That's probably true. This is probably death now for a formal shoe where you don't see anybody's shoes anymore. So the market is nice. Aren't shoes, the orange sold shoes. I am. Yes. You have those on today. All right . Yes. I mean, I could not be and I'm lying, but I am wearing those right now. Those are spiffy. All right . We just actually had an episode about determining a, the home value, if you're about to list a property and you know, it's , uh , it was a , it was a good conversation. Just talking about , uh, you know, how you as a broker determines a price , uh, using a comparative market analysis , uh, actually using the Zestimate or using you saying, you know, don't ignore it. Even though you look at it at a very, very end. We talked about, you know, what comps to look at the , the 12 property method with six sold. And was it three on the market, three expired or canceled, expired or canceled. Okay. All right . So let's say, let's say we've gotten to the point that you have a price recommendation, a target price for your client. Um, that's not necessarily the price at which you're going to list the property, is that true and not necessarily. So now we've gone through the analysis, we've done a good job. We would determine what the market value of the property is.

Speaker 3:

Now today's conversation is what exactly we're going to do with it. Um, and there are three general strategies with this. Um, this part isn't really rocket science, but we could , um, list the property for less than what we think is worth. We could list it for more than what we think is worth, or he listened for exactly what we think is worth. And the three different situations you'll have three very different outcomes. There are pros and cons to each , um, and that's what we're here to go through today .

Speaker 1:

Okay. So let's, let's say let's put some numbers behind it just to make it tangible. I think very numerically , uh, let's use $500,000 as the number that you think of property is worth. Okay. It doesn't matter the type let's call it, we'll call it an urban property. Right. So in, in a city environment, in a neighborhood that people is, you know, has an average level of interest, or how do you want to position that?

Speaker 3:

Let's just call this an average condo unit and average neighborhood. This is okay, this is just your average place. And luckily the math works out evenly and it's $500,000 is the market value of the home. Okay. So , okay. There we go. All right . So we'll use that going through.

Speaker 1:

Good. So where do you want to start? What would the situation be where you want to go low on the, on the dot or high?

Speaker 3:

So let's talk about , um, the strategies and the pros and the cons of listing your property , um, below market value. And there are so, you know, we listed it for , you know, not four 99, cause we're NDA nine 49 is 500, but let's say we listed it for four 80 and we went below what we think the market value is. Well that's. Um, there , the advantage of that strategy is you're likely to generate a lot more interest. Um, there'll be, you'll have a higher number of people coming to the open house, a lot more excitement of the , um , to see the home. And you're more likely to trigger a bidding war among your buyers. So there's , um, a reason to, to, to list a little bit below what we think the property is worth. And that works in hand with the strategy of driving all the interest through the property around the same time. So you'll see this commonly in this market now where people are listing for a little bit under what they think the property is going to sell for. They are withholding all shows until the first round of open houses, having an exorbitant number of people come through , um, that first weekend. And now they have a bidding war on Monday or Tuesday , um, that they're sorting through. That's the advantage of that strategy , um, that works in a mild sellers market is probably the best time to adopt something like that. But there are downsides to that too. Um, the first of which is you're going to have a ton of people come through your home , um, in this environment where kind of the, hopefully with the tail end of COVID, but adopting this strategy in the midst of COVID means you're going have a ton of people coming through your home , um, for a lot of sellers that may be , um, off-putting. Yeah , and it may just be a lot, even in, in regular times to have a huge audience of people come through your home. A lot, many people aren't comfortable with that, and you're going to have a lot of tire-kickers and a lot of people that aren't incredibly serious with it. And then of course there's a big downside risk is you're going to get what you ask for , um, and to, to get , um , uh , a property that's , um, you're going to get offers that are worth less because you valued it for less. So that's a downside risk , um, to it there. Um, and then the converse strategy is listing it a bit too high. This is my least favorite strategy. This is not something that I would encourage anybody to do. Um, but the advantages of listing high, you may get what you asked for. Um , you may set the expectations for a few buyers that are , come through, take a look at it. You also might constrict the actual showings and people who come through to serious buyers , um , to those who are really particularly interested in that property. And you're not going to get the traffic that, you know, depending on your situation, you may not want. And it also may work for sellers who are just not motivated sellers. Um, so depending on the situation, if they don't need to sell , um , but they want to see what's out there. Maybe they do want to constrict , um , traffic and interest to those who are at the price point that would actually get them to move out. So there are some advantages there. The big downside to it is that you're not going to get that traffic . So for most sellers not having that attention, not generating that interest , um, is going to be fatal , um, to, to them getting a quick sale and the property. And because you have most eyes on a listing, normally I say the first 14 days that it slide , but really the first seven, now that it's live , um, you know, so testing out the market at high price point and reducing that later , that's , uh , in the market that spend the past few years in the market that I projected in the next coming year. That's just a bad strategy because you're likely to leave a lot of people behind. And when you were just the price, Oh , you're left with a lot of people wondering what's wrong with it because most correctly priced properties , um, sell , uh, sell quickly. So you're , it's not a good strategy just to put things out and then just see how it goes.

Speaker 1:

Yeah. I've seen a couple of properties lately that they've been reduced two or three times. And as someone that is looking at us saying, maybe I should buy this or not. It feels not only that there's something wrong with the property, but I feel like there's something wrong with the seller. Like this is going to be a difficult person to work with. If they set their price again, using the $500,000 example, let's say they set it at five 79 and then they lowered it to five 69. Then they lowered it to five 49 and they haven't gotten any takers. I mean, like, I don't know, maybe I'll look at it and now I'm going to low ball on it. You know , now I'm going to put it an offer really low, and they're probably going to get even more annoyed with me. But, you know, part of me says, well, geez, this person had such false expectations with this property. How are they going to be to try to negotiate when I'm worried about not just the price, but you know, what the inspection turns up and any concessions I might have to get, like ,

Speaker 3:

Um , that's an interesting point. I haven't , um, may go back and try to quantify that later on. But , um, when I looked at properties that have been listed for awhile and you go back and you see the market history often there is a quirk , um , that correlates to that there , sometimes the listing agent might be the seller themselves, and they've never listened to anything else before and have no market history. So that's, what's enabling that listen to go up there. They've not sought outside professional help. Um, or you might have a entry only situation where they hired a listing broker, but only to put the listing up, but not to provide any other service or advice. I have seen quite a few of that before I say that that's , that's, what's exactly out there. I should probably take a look and quantify, but you're right. There are, people are wondering what is wrong with the property? Is it, is there a legal problem with the property? There's a physical problem with the property? Is there a personality problem with the property? Um, those are all things that , um, that are red flags for people. And for most buyers, they're just going to turn their attention to what's new in the market, because those are the pro promising properties to them, the new and exciting ones, the one that's been listed for 21 days and has two price reductions. That's, that's a red flag. Um, certainly in this market , um, for places

Speaker 1:

You just mentioned something that , uh, I'm going to take it as a tangent, but , um, a entry only , uh, agent, can you define that? Because I want to tell my little story about that too.

Speaker 3:

Sure. So, so it's not my place as a brokerage to criticize other brokerages. So there's a disclaimer there. Well, it's relaxed, but the , um , the it entry only office is an office that gets paid usually a flat fee , um, to be an order taker for the , um, the seller. And they just, you know, use their MLS account, put the information in there. So now they have an MLS listing. Um , but they're providing no other service that the listing agent is not coordinating showings. They're not handling any negotiations. They're not providing any advice to the seller. You as a buyer or buyer's rep, you have to deal directly with the seller@theiraol.com email address and try to figure it out,

Speaker 1:

Offer my opinion of the situation where I encountered a listing entry only agent. And that's, you know , if you are an entry only agent, and you're listening to this, I advise that if you're going to take an entry for a listing and pocket, your flat fee, you should make sure that your client has the right to use the photos that they're supplying to you, because if they don't, you can get into a copyright infringement issue. And I certainly didn't push the buttons, but I sent a sternly worded email when there was a photo that I took. And by taking it, I own the copyright that , uh , I discovered on a listing. And I said, you don't own that photo. I own that photo. And I just want you to take it down. And the response was, the seller said that, you know, we could use these photos, we just, you know , enter the listing. And I'm thinking you have a responsibility to understand that what you're representing is , is accurate. So on, we went from there and I won't put you in a legal bind to comment on that, but me as the copyright owner of that photo,

Speaker 3:

I just basically said, take it down. Yeah. But

Speaker 1:

Conversation, that's fair.

Speaker 3:

Maybe we'll talk about what

Speaker 1:

This is real estate law. Right. You know, that's what the subject of this podcast is. So, you know, sometimes we'll talk more about real estate sometimes to talk about law and a little copyright law that won't hurt us either. Will it

Speaker 3:

We'll find out when we get the cease and desist.

Speaker 1:

Jeez . Yeah. So back to back to the task at hand. So we talked about how, you know, all the issues with listing it too high, you know, this market, these days more people are deferring to, you know , listing it for the price it's worth or a little low because they wanna , you know , just really stoke the flames of a buyer as well.

Speaker 3:

Sure. So we have, we've talked about like pricing low and pricing high. Uh , what's left is pricing , um, on or about exactly what the property's worth. And that is my advice for people. And I expect that to be my advice going forward this year. Um, because you have a bit of a sellers market, you don't need the artificial , um, interest in pricing low. Um, that's, you don't need to , to generate that extra hype , um, that you would in a, more of a stagnant market. Um, you can list for what it's worth, get the correct amount of interest , um, through their property. If you still follow the , the right marketing strategy, you're likely to have of bitters more , but perhaps a , you know , a few less offers. Um, but you'll be selling for more what you need and why that's better than just listing low in this market. Um, you know, we see a lot of agents right now who are listing properties and bragging that this older for $50,000 over this price. Yes, that feels good when that happens to your listing. But what that tells me is that you listed it too low , um, that your , you didn't value the property quickly, and you had a pleasant surprise on the backside now. Sure. There's credit to be earned if you had a great, brilliant marketing effort to end up having, you know, stretching that price afterward. Um, you're certainly better than had you overpriced the listing and tried to work backward from there. But if you're stretching way more than the list price , uh, consistently than perhaps you're not , um, listing the property , um, where it should be,

Speaker 1:

You know, a potential buyer, could I , could I just add a comment about agents that do that? Like, honestly, this is a little bit of like, get off your high horse, like as someone that's looking for properties. Um, and I, you know, everyone's always looking for properties, but you almost feel as though the fact that right now we're in a huge sellers market that the agents like internalize that and it empowers them and they become superheroes when you're communicating with them, like be nice to people that you're accepting offers from like, it's a business transaction, your reputation is at stake here. Like don't be, you know , a debug or something that basically says, you know, we hold all the cards, we have the power. That's not how you want to operate. You don't want that, that reputation from the people whose offer is , is, is not accepted because that's happening more and more these days, if you're going to submit an offer on a property, it's more likely you're not going to get it. There's more likely going to have more property, more offers on that same property. So you kind of want to leave the people that didn't buy that , uh , or didn't get it with a , with a good taste in their mouth with you as the seller's agent. And that does not always happen. And, you know, if you're listening to this and you're selling in this environment, like just, there's a lot of ego in real estate, like get over yourself really just a little bit, get over yourself. And this is where this is. What's good about having the two of us on this podcast. I could say this stuff like, because I'm not an agent, I'm not an attorney, I'm someone that's an investor. And I'm someone that's like in the market, you know, look into, you know, to buy properties. But you just, you leave that feeling saying, I'm not going to buy a property from this person again. Like they just, they, they become, you know, it mentally difficult to work with. Um, so yeah, I mean, if, if you hold the cards as an agent and you have a property that's in high demand, like be really respectful to the people that are bidding on that property and, you know, don't lie.

Speaker 3:

And it blows my mind that agents behave in that way, because one of the ancillary benefits of having a property that had a ton of interest is that you have a chance to build a professional relationship with the buyers agents have come through or even pick up new clients to the buyers that came through. 'em , if they're impressed with your professionalism, the more opportunities you have to interact and do business with somebody, the more relationships you're going to have, and the stronger your business is going to be in the longer term. And it's such a wasted opportunity to treat people that way. Um, and not every agent's doing that, but , um, there , yeah, you're right. There's a bit of an ego involved in, you know, in patting themselves on the back. Um, when you have such a tailwind in this market, as the listing agent want to know what you did well and what you did poorly, and you've with just good data propping you up, it's hard to really diagnose exactly how well you've done.

Speaker 1:

Yes, absolutely. Uh, not to go on diatribes or whatnot, but, you know, I think that respect even in a market like this is super important. And, you know, I could imagine if one of your agents did that. Nope. And

Speaker 3:

You know, you're likely to be buyer's agent. Another point in the market is going to turn maybe not this year, but some other time. Um, and the more connections the BA the strong , you know, the more trust you build in the market with , um, your competitors , um, the better you're going to be able to serve your clients.

Speaker 1:

Right. Excellent. Well, great advice once again, Rory. Um, so if people have questions about pricing strategies , uh, if they think that they were done wrong by their agents , if they are about to enter the market, they don't know where to start. Uh , how can they get ahold of you

Speaker 3:

Next home ? Titletown real estate.com. Um , we have a couple of tools on the site to give you a preliminary estimate, but , um, as we discussed , um, come talk to us. We will not only come up with a good valuation for you, but the right marketing strategy for , uh, for your home.

Speaker 1:

Right on. Cool. All right. Well, good. Uh , thanks again, Rory . We really appreciate it. Uh, so once again, this has been the real estate law podcast. My name is Jason mute . This is worry Gill with next home. Titletown real estate here in Boston, and we're so glad that you listened and we're looking forward to talking to you next time. Thank you. We'll see you next time.

Speaker 2:

This has been the real estate law podcast because real estate is more than just pretty pictures and law goes well beyond the paperwork in courtroom arguments. We're powered by next home. Titletown greater. Boston's progressive real estate brokerage more at next home. titletown.com and urban village legal, Massachusetts real estate counselor , serving savvy property owners, lenders, and investors@urbanvillagelegal.com. Today's conversation was not legal advice, but we hope you found it entertaining and informative. Discover more@realestatelawpodcast.com. Thank you for listening.