Common Pricing Objections

This post isn’t meant to be condescending but rather to educate prospective sellers.

I encounter the same pricing objections over and over, and I’m thinking maybe it would help to see the shoe on the other foot.

Selling your home is a very emotional process, and maybe these pricing objections won’t fall on deaf ears if they’re read in advance…

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“Another agent said our property was worth more.”

Call me cynical, but my current answer is: “Well then, list it with him.”

It’s no secret that agents “buy” listings all the time.

Many agents believe that by quoting the highest value for the property, they’ll get the business.  This is true a good portion of the time.

Perhaps the agent plans to leave the unit on the market, wait out the storm, and ask for a price reduction.  Or perhaps the agent doesn’t really have a plan – he just knows he has a listing!

But as a seller, if you interview two agents who say that the property is worth $599,000, and one agent who says that the property is worth $669,000, shouldn’t that worry you?

What an agent says your property is “worth” is part-and-parcel of his entire pitch.  I’ve always said that there are four fundamental criteria of my services: timing, pricing, staging, and marketing.  Pricing is only one of the issues you need to be concerned with when interviewing an agent.

“Our house is better than our neighbours’ house and it sold for more.”

I would ask, “When was the last time you were inside that house?”

If the sellers say that they’ve never been inside, well, then I think they’ve rebutted their own suggestion.

If they’ve been over several times, and attended the public open house when the property was for sale, I would engage them in a discussion about the pros and cons of each property and the factors affecting value.

Perhaps they’re looking at their own sparkling kitchen, but not considering that their frontage is 30 feet and their neighbours’ was 36 feet.

Or perhaps they have a well-manicured backyard that they take pride in, but fail to realize that their unfinished basement can help value their property $40,000 less than their neighbours’, which has a rec-room and a 4-piece bath in the basement.

Many sellers get emotional when comparing their properties to those of the people they see on their street day-in and day-out.  Whether they realize they are being competitive or whether it’s entirely subconscious, most sellers feel the need to “beat” their neighbours on price, and it distorts their perception of the value of their homes.

“Let’s try it at this price for a month and see what happens.”

Nobody buys stale bread.  Do you know why?  Because it’s stale…

If you list your condo at $349,000 knowing full-well that it’s worth $315,000 on the absolute sunniest of days, then you have to know what outcome to expect.

I’m not a psychic, but when people say, “Let’s see what happens,” I get a little fired up and say, “I know what’s going to happen – nothing!  We don’t have to wait – I can tell you right now.  NOTHING will happen.”

Am I wrong?

Why would somebody buy a stale loaf of bread when there’s a fresh one right next to it?  Does that shopper feel ‘bad’ for the stale loaf?

Is there some magical buyer out there that’s going to take pittance on a condo-seller who has priced his condo at 110% of fair market value?

Leaving your property on the market for a month and letting it go stale is a terrible idea.  Buyers assume there is something wrong with it.

You know the saying, “If it were a good idea, somebody would have thought of it already”?  Well I think it’s fair to say in real estate, “If the property was worth what they’re asking, it would have sold already.”

Buyer’s aren’t interested in stale listings.  They want fresh ones.

“We can always reduce the price down the road.”

This goes hand-in-hand with the point above.

In a red-hot market, the thinking was to price your property below market value, create a buzz, and try and get multiple buyers to the table all at once.  Ideally, you’d end up with more than fair market value.

But even in a buyer’s market, you still don’t want to price high and then reduce, reduce, reduce.

Just as a “stale listing” will deter buyers, the “price change” sends up a flag that the property was over-priced.  I know I say “was” over-priced as in past-tense, but the buyers still assume in their minds that if the property was over-priced before and needed a price change, then it could still be over-priced right now.  Call it a trust issue.

Some people think that the price change spurs interest and activity.  I don’t.  I think it shouts, “We screwed up” at full volume.

Buyers want what other buyers want.  They want what’s hot, what’s popular, and what’s “in.”

They don’t want a property that’s been sitting on the market getting stale and which has been reduced in price from $469,000, to $449,000, to $439,000.

When I go grocery shopping and I see the “FINAL SALE” items on the rack next to the garbage room, I don’t feel like a snob when I say that I’m not really interested in looking at all.  Do I really want yogurt that is one day from the “best before” date?  Do I want to buy mushy bananas just because they were reduced in price to $0.69 per pound from $0.99?  And just because they have only two tubes of that Dr. Scholl’s toothpaste left over from the ill-fated decision to buy toothpaste from the manufacturer of foot products, doesn’t mean that I’m going to pay $1.00 for something that at one time was priced at $2.50…

“We’re willing to wait as long as it takes!”

Oh boy.

I think we’ve covered this one, haven’t we?

I’ve had sellers tell me, “We want to list our house at (X) and we’re willing to wait as long as it takes!”

What if the price is completely unachievable?  Does it matter how long you wait?

I suppose if you were willing to wait, say, eight years and find yourself in a completely different economy and real estate cycle, then perhaps you could get 125% of market value.  Failing that, I don’t think “waiting” is a viable pricing strategy.

As I explained above – leaving your property on the market month after month is NOT a good thing!  Some sellers believe this is actually a pricing strategy!  They think that at some point, a buyer will fall in love with their home and that buyer may not surface until the snow thaws next fall.  Soooooooo, they’re willing to be patient!

There’s something to be said for “turning a negative into a positive,” but I don’t think that adage applies in this case.

Okay, there’s a lot more to cover so perhaps we’ll pick this up again on Tuesday… 

7 Comments

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  1. toronto says:

    With MLS you can judge the asking price of the adjacent units but you dont have the information of the actual price its been sold for,with a good agent they can provide print outs of units that been sold so you can tailor your own asking price.To make your property move attractive spend a little more on improving simple things,like tiles,light fixtures,even a fresh coat of paint will make your unit stand out from the rest.

  2. Princess Clara says:

    Whats the point in hiring someone if they need 2 and 3 trys to get their job right when you can hire someone else for the same commission to get it right the first time?

  3. Ryan says:

    The issue about the principal agent problem described above by Gerrit is covered in detail in the book Freakonomics. It was concluded that realtor houses sold for more and stayed on the market longer than their clients houses. That would give merit to what Gerrit said – that realtors are in it for a quick buck, and they have no incentive to get sellers their extra $10k.

    This may also lead to why some buyers are simply willing to leave the house on the market for a while, as that’s what realtors are doing too!

  4. Marina says:

    I think it’s really difficult for a seller to commoditize their house. You see the neighbor’s finished basement, but I see his manky aluminum siding and I don’t see why my pretty house is not worth as much. I think it takes time and experience to be able to look at it from a buyer’s point of view and price a property rationally.

    David, is there a good calculator online where you can plug in a comparable property, and then make adjustments (add a garage, but subtract a basement or renovated bathroom) to come up with a comparable value for your house? In a sort of impartial quantitative way…

  5. Ian says:

    David, at what point does a repeated price reduction on a home that hasn’t sold become identifiable by a smarter buyer as a good buy and ripe for purchase, and the absence of other buyers merely stigma associated with the price-inconsistency and length of time on market that he/she is now in a position to exploit?

    Your description of prospective buyers’ reactions to overpriced stale listings likely correctly describes the average buyer who is concerned and suspicious about the implications of a repeated price reduction and time on market.

    But obviously, at some point, the unit becomes valued correctly, however stigmatized it’s become because of the initial inflated price and resulting time on market. Wouldn’t a smarter buyer seek out such units and eventually say “the unit is now priced about right, and nobody’s going to buy it because of the suspicion and stigma generated by the length of time the unit’s been on the market, and the repeated price reductions – I should buy it now”?

  6. David Fleming says:

    @ Gerrit

    I completely agree with you.

    I suppose that often I take “trust” for granted, and assume that if a seller calls in three agents, all three are reputable.

    But you have a point.

    I wonder if there’s a “long term” future for a Realtor who consistently under-prices for quick sales, however. There are Realtors out there who work from deal-to-deal and never try and build a business or a reputation, but I don’t think these people last very long.

  7. Gerrit says:

    Not that I disagree with your post at all, but I think that the fear that sellers have is that their agents are only concerned with selling the property as soon as possible.

    For instance, if an agent two properties valued at 600,000 wouldn’t it make more sense to list them at 570,000 and make the quick sale? Their commission would drop only slightly and you’d be able to quickly find two more clients to replace the ones that just sold.

    Buyers today know that the price means a lot less to the agent than it does to the seller (or buyer). An agent typically just wants to make a sale – the buying agent wants the client to offer more (to ensure they get the property) and the selling agent wants the client to offer the property for less. Ten grand to the seller is a lot of money, to the agent it hardly makes a difference to their commission.

    I apologize for the generalization (it’s obviously not how to build a good reputation or trust with clients), but it’s the perception that most people have about agents.

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