It’s Not Our Job To Be Right When Pricing PropertiesFeb 01, 2024
Let me preface this before you get all uptight and comment on the title. Of course, we want to be accurate when pricing properties. However, the correct price to list a property is not up to us, it’s up to the seller.
Yep, I get it, most sellers think their home is worth more than all of the comps, it’s just human nature. I used to be stubborn when it came to pricing properties. Being a numbers geek, I have a system that I use to "properly" price properties. Of course, it’s fairly easy in a subdivision where the same model has sold multiple times, but pricing a custom home in a unique setting can be more difficult.
For instance, a custom beach property overlooking the Pacific Ocean. I can pull comps on square footage, bedrooms, baths, updates, etc. But what the view and the location are worth is subjective. In one of my markets, there are homes up on a hill with tremendous ocean views. But they are not walkable to the beach or town. Is that important? It is to most folks, so I value the homes down the hill for more than up the hill. Also, white water views are worth significantly more than just open ocean views. All subjective of course, and when it comes time for the appraisal, I often have to explain these nuances to appraisers who are not familiar with coastal properties.
The problem lies within the seller’s mind. The folks who live up the hill may disagree that walking to the beach or town is more important than sweeping ocean views. So, what do you do? I used to not take the listing if I felt what the seller wanted was well over my valuation. The result was that another agent would list at what the seller wanted, and it would sit and sit. So, was I right? Maybe, but I also didn’t get paid! It turned out to be a lose, lose, lose, situation for me, the seller, and the second agent.
Back in 2020, just before the market went berserk, I turned down a high-end listing because the sellers wanted what I thought was severely over the “right” price. Another agent in the area and I laughed when someone from out of the area listed it ABOVE what the sellers wanted. “It’s going to be there forever!”, we mused. Yep, it sold, and for more than the list price!
I had two choices at that time, to admit that I was wrong, or justify it by saying that the buyer was uneducated and didn’t know they were overpaying. I took a step back from my pride and asked myself how I could have gotten that listing and had it be a win-win situation. I realized that it wasn’t my job to be right, it was my job to represent the seller's interest. But how do I do that while not losing a ton of money with over-priced listings just sitting on the market? That is a lose-lose situation for both parties.
I then came up with a solution. If a seller wants to list their property above what I feel the market value is, I say ok. But, on one condition, we have built-in price reductions at predetermined dates, eventually getting down to the valuation that I felt the home should be. Of course, if there is serious activity on it we would hold off. This system has worked well in getting those listings and setting reasonable expectations with the seller. It allows them to be right at the beginning of the listing but gives me the safety net of reducing if I was “right” about the price.
Circling back to the title, It’s Not Our Job To Be Right When Pricing Properties. A few years ago, I would have argued until I was blue in the face that it IS our job to be right when pricing properties. But like with many things I get stubborn about, I would have been wrong! It’s not about being right or wrong, it’s about selling the home for the highest net possible for the seller. How you get there is a matter of how you look at the situation.
Thank you for your time,
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