A Discourse about Strategic Pricing on a Rainy Afternoon
(or "Getting It Right")


My brother Jerry and his family were here for a great visit in rainy Wilmington NC this week. (Not sure why, but it always rains when he comes to town.  They're welcome anytime, but I'll be sure to invite him back when we're having a drought.)

Not surprisingly, we got on the subject of real estate.   He said he read somewhere that a real estate agent will almost always try to get their client's house sold quickly with a low price -- not for the client's benefit, but so they can get their commission sooner.  And that many or most sellers would rather take longer to sell if they can get even a few extra thousand dollars.

Now, my brother knows me, and he knows I'm honest and would always put the interest of my clients first, so I didn't take personal offense.  I also know that there are some agents out there who do put their own interests before those of their clients -- just as there are agents with real integrity.
But I definitely had to take some issue with his statement.  The situation is just not that simple -- taking longer to sell does not necessary translate to more money for the buyer!  As it happens, just recently I finished an advanced course to become a Strategic Pricing Specialist (SPS) -- so I knew I could speak with some authority.   (Poor Jerry.   I'll shorten my discourse (rant) here.)

First, a good professional real estate agent will have determined the priorities of the sellers -- money, time or convenience.   If there is an important reason the sellers need to move quickly -- say, within two months because of a job transfer -- and the agent knows that the average time for a home to sell in that particular market is four months -- then to ensure the house sells in time to meet the needs of the seller, it will have to be priced below market value.    If there's no rush to sell, then pricing at or near market value can make more sense for the seller.   (FYI, the average time on the market for a home here in Wilmington right now is 4 1/2 months -- which is a nice improvement over previous statistics.)

But what happens the longer a house sits on the market?  It can start to look stale and problematic to buyers -- who accordingly drop the price of their offers.  Or offers stop coming in.

Most of the time, real estate agents are struggling with sellers who insist on overpricing their homes for various reasons.   They are emotionally invested in the home, don't understand the current market trends, or the fact that it is the market that sets the value of their home (not their financial investment in the house).

An initially overpriced home ultimately costs the seller money.  It is crucial to set the price right from the start.  The longer it sits on the market, the more difficult it is to sell.  And something a little scary happens when a seller is forced to start dropping the price.  According to statistics compiled by the National Association of Realtors (NAR), homes that need to have a price reduction take 3 times longer to sell, and on average sell for only 86% of the last list price.   Usually, the seller nets less money by initially overpricing than if he/she had priced it right to start.

The key, of course is being confident you know the real market value, and then how to strategically price a home to best meet the client's need.  Going well beyond the traditional comparative market analysis (CMA) used by most agents, the Strategic Pricing Specialist (SPS) class taught me skills needed to navigate pricing strategies, understand and apply market trends, and put a value to 'how buyers buy.'   Also, how to help a client understand the process.   All this to ensure my clients get the best net in their pockets, within the period of time they need, and with the least hassle.   I'm so excited to be using this process now!

As you can see, my brother got an earful!

One important thing I've learned about being a real estate agent ...  I will never be done learning!    I could spend all my time in training classes, in continuing education, studying the neighborhoods, analyzing the markets, learning about home construction, figuring out the technology, deciphering contracts, etc.  The SPS class was, so far, one of the best classes I've taken.  For me, the best part of real estate is working with and helping people, but it's been really great keeping those brain cells snapping.  I'm enjoying the educational and analytic side of the business, and know ultimately it will benefit my clients.  Now--while I'm building a client base--is also a great time to focus on training.

Got any questions?    Let me know.