March 18, 2022 Luke Russell

WHY PRICING LIMITS YOUR PRICE

PRICING A (WELL-PRESENTED) PROPERTY PLACES A CEILING OR ANCHOR ON YOUR PRICE OUTCOME

Click here to see how pricing limits your price

Have you ever heard an agent say, “unpriced homes frustrate buyers and drive buyers away”?

This statement is not entirely untrue, however, it is only true in the world of an agent who is using an incorrect process.

Step 1 of EVERY reliable and high impact sales process is … ‘get the presentation right’.

Failure to present your home well will relegate your home into the category of ‘the ordinary’ which will immediately limit the buyer interest. It is the low appeal ‘ordinary and/or poorly presented homes’ where public advertising of a price can save the listing and attract potential buyers.

Ordinary homes, or poorly presented homes, are almost always the homes that need pricing to attract their buyers. Well-presented homes (that may even be classed as ordinary homes without the assistance of good presentation) are far more appealing than similarly valued homes in their local area and will almost always destroy their ‘upside value’ when any type of price or price range is placed on the listing at the beginning of a campaign.

If your home is well presented and well marketed (using all of the best online promotional technologies) there will be no end of buyers lining up to enquire about your home … and when the buyers do enquire they will have just one question “what’s the price?”.

"It is a myth that un-priced homes will not attract high levels of buyer interest. It is the presentation standard of the home and marketing that determines buyer enquiry."

At this point it is very important to understand that every buyer wants and needs some form of price guidance. No buyer simply wants to be told ‘just make an offer’. That is NOT the point of advertising a property ‘For Sale’, unpriced. Giving buyers who enquire zero guidance is not only unhelpful it will genuinely turn buyers away from your home. If this is the approach an agent intends on pursuing with an unpriced property then they will do just as much damage to your price and your buyer pool as a publicly advertised price will.

"Not placing an advertised price on a home does not mean an agent does not give price guidance to buyer enquiries."

Here’s what happens next …

  • When a home is well presented, and is attracting high levels of buyer interest, buyers will phone, text or email the agent with one question … “what’s the price?”.
  • Buyers who make the ‘what’s the price’ enquiry now provide the agent with an opportunity to establish either an immediate rapport with a potential buyer or it will allow the agent to provide some form of price guidance that will motivate the potential buyer to attend the open home and compete for the home
  • Providing potential enquring buyers with the appropriate price guidance removes all frustrations and leaves every potential buyer completely satisfied that they now have an approximate price target. That said, it will not constrain the final price or the levels of competition. On the contrary, providing the appropriate price guidance encourages open home attendance and fosters the optimal level of buyer competition at the beginning of the campaign.

If you are looking for a reliable way to achieve an above-market price there are 3 simple, but important price points … The Theoretical Price Point, The Realistic Price Point and The Final Price Point.

1. The agent shoud provide comprehensive advice on the theoretical price range of the home based on recent local sales data. THIS IS JUST A STARTING POINT AND WILL NOT TELL THE AGENT OR THE SELLER THE MARKET VALUE OF THEIR HOME.

2. The level of buyer competition in the real campaign will dictate the true market value of the home. For well-presented and well marketed homes, this is often higher than the theoretical price point of the home. It is like a rising tide that lifts all boats. If a home is well presented and achieves 20 offers that, after all competition and emotional price increases are done and dusted, results in 18 of these offers all sitting at a similar price point, then both the agent and the seller can be very confident that they know realistic price point of the home. It is important to understand, in a non-transparent private treaty environment, that NONE of the 20 buyers got together in cafe to compare what each buyer was willing to offer. They all came to their final conclusion based upon the guidance of the agent and their own opinion of the viable value of the home. This type of feedback is the most accurate, and independent, ‘survey’ of your home’s true value.

3. Once the realistic value of your home has been assessed from the real market now you can start looking for ‘outliers’, or out-of-sync buyers who are willing to pay a higher amount than what every one else believes your home is worth. These buyers will either be more emotional, more motivated or less informed than the balance of the market.

"Placing prices on homes based upon ‘comparable market sales’ is a critical mistake if you are trying to achieve an above-market price"

OTHER CRITICAL POINTS TO BEAR IN MIND

  • Pricing a home prior to any realistic market feedback is highly unprofessional and is akin to fortune telling. Agents who do this are making a ‘price guess’ they have no right to make, and end up risking a seller’s price premium.
  • Using an agent who places prices on homes based upon ‘comparable market sales’ is a critical mistake if you are trying to achieve an above-market price. If the price is placed lower than the realistic market price then this will simply anchor your home’s price to the lower ‘fair market value’ of similarly valued homes and it will give buyers a reference point that allows them to see the price difference between the advertised price and a price point above that. This price gap will often give a potential buyer the impression that they are paying too much if they increase their offer, when the reality may simply be that the agent has misread the market’s opinion of the value of the home because they relied only on historical sales data.
  • Pricing a home much higher than the realistic market value (that can only be discovered in the actual campaign) will also deter buyers from attending the open home and places a price ceiling on the potential upside of your home.
  • When an agent does not publicly advertise a price message to potential buyers it also allows the agent to adjust their price message (without derailing the entire campaign) as the levels of buyer interest change through the campaign. Rule number 1 in negotiation is, ‘never paint yourself into a corner’. Advertising a public price is merely a convenience for an agent and illustrates they are a novice negotiator.
  • Not pricing a home provides more data to an agent. Ever wondered why online listing portals like www.realestate.com.au only put half the agent’s phone number on the listing? Well, every time a potential buyer wants to phone or text an agent they are required to click on the agent’s number to expose the full amount of digits. This simple action of clicking on the agent’s half exposed number registers as a ‘buyer enquiry’ and gives and agent and their seller additional ‘buyer interest’ data which allows the agent and seller to see how their online campaign is going in comparison to other local listings. When a home has a price on it (of any kind) buyers do not need to make any enquiry about the price expectation of range because it is printed right there in front of them. Pricing limits campaign data.
  • For more information on understanding price issues just download our Price Truths or Negotiation Truths books here.
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