from Florida Realtor Magazine, May 2007 | by Heidi Russell Rafferty | page 26

Smart Price Advice

Helping sellers price their homes has never been more challenging. We’ve got tips for handling it with aplomb.

In another time, the listing on a waterfront property would’ve been a golden sales opportunity even though the home needed tons of repairs.
 
However, with a lot more homes on the market and a seller who insisted the home was worth quite a bit more than her neighborhood analysis revealed, Carrie Ciolino, of Century 21 AAIM Realty Group in Fort Myers, knew it would be challenging to get this listing sold.

When the seller refused to budge on price, she walked away.

“I think it floored him, and I second-guessed myself as I pulled away. But I don’t want another listing that will be disappointing,” says Ciolino.

She’s not the only one who feels that way. More and more, real estate professionals are turning down listings because the property owners, accustomed to the boom market, just want too much. Some sales associates reveal that during the past year, they’ve regularly refused one out of three listings because they believe them to be way overpriced.

So how do you deal with a seller who isn’t prepared to list at a realistic price for the current market?

Anthony Cutaia, who with his wife, Susan, hosts “Talk about Mortgages and Real Estate,” a live call-in radio show heard daily by more than 3 million listeners in South Florida. He has more than 35 years of experience in the real estate business and is a licensed mortgage and real estate broker. His advice—“Stick to your guns. Do a real analysis. It’s incumbent [on you] to convince the seller what the market really is,” Cutaia says. “Have an appraisal done. … That gives you ammunition to work with the seller and get a bona fide price.”

Here are more tips on how to finesse sticky discussions and give sellers the reality check they need:

1. Assess the seller’s motivation off the bat, says Keith Wettstein, of Assist 2 Sell Buyers and Sellers Real Estate Advantage in Jacksonville. During the last quarter alone, he’s turned down about two dozen listings because, as he says, “[Sellers don’t] want to face the fact that things have slowed down.”

When he first meets with prospective clients, he determines how much they care about how soon the house will be sold. “Are they moving to buy another house? Is it their job? An illness? The whole reason behind it matters. If they say, ‘I don’t care if it sells for a year or two,’ [that’s a red flag],” says Wettstein.

He says that people are usually very open about why they’re selling. Normally, he doesn’t even have to ask the question—they just offer up the information. Some people are so surprisingly blunt about their unrealistic price expectation that there’s no question that he has to walk away, he adds. “Unfortunately, it’s like going to your doctor, and he says, ‘You have cancer,’ and you tell the doctor, ‘No, I don’t,’” he says.

Those who heed Wettstein’s pricing advice usually sell their homes within six months, he says. He also doesn’t mind being the third or fourth in a line of real estate sales associates who have unsuccessfully tried to sell one listing. “I’d rather be the third one to talk to them, because by the time they get to me, their motivation changes,” he says. “When I come into one that’s expired from another company, I find out what that company did so that I can do something different.”

2. Prove that the numbers don’t lie, says Nicki Conway, of RE/MAX Properties in Sarasota. She locks herself into her office and analyzes tax records on everything sold in the prospective client’s neighborhood during 2003—the last year on record where prices were comparable to today’s, she says.

Conway looks at properties with characteristics similar to those of the seller’s house. Then she makes adjustments for items like square footage and pools, takes that number and adds 10 percent per year for compounded interest. Nationwide, normal market gain per year is 4 to 6 percent, but Sarasota’s average is 10 to 13, she explains.

If prospective clients insist on a price $100,000 over her recommendation, she won’t take the listing. If it’s $25,000 to $35,000 over, she makes them sign an agreement stating that they’ll reduce the price a specific percentage in two weeks if there are no showings. She also suggests that they get an appraisal, telling them that she’ll consider listing higher if the appraisal comes in higher. “If the appraisal comes in lower, then I insist we list slightly below appraisal and use that as a marketing tool,” Conway says.

So far this year, she’s sold four homes, one of which she sold both sides of the transaction. She also goes through the same analysis process for her buyers. “We need to come up with a fair price,” Conway says.

Cutaia agrees that getting a “real value” from an appraiser improves the seller’s perspective. “You don’t have to sell it for the appraised value. The appraisal is just an opinion of value that you can rely on,” he says.

3. Set a deadline, says Charlene Trimmer, a Coldwell Banker sales associate in Pinecrest North (Miami). The Coldwell Banker Corp. provides written forms for the seller to agree to list at a certain price until a designated date, then to drop the price if there’s no activity.

Although Trimmer doesn’t use the forms, she still asks clients for a verbal agreement to drop the price by a certain date, based on progress against measurable parameters. Those include number of showings, number of Web site hits or phone calls from sales signs, and other sales associate/customer feedback.

A former marketing executive with Procter & Gamble, Trimmer explains to sellers that “no business does business without objectives and parameters to be reached. … I know how many hits they’ll get or showings they should have, and if we don’t have the first number within two to three weeks, then we have a problem,” she says.

If she meets resistance, she suggests the seller pay for an appraisal (which costs $250 to $300). She tells them that if the appraiser agrees that the house is worth more than her estimate, she’ll pay the appraisal costs.

She hasn’t had to pay for an appraisal yet.

Cutaia has one caveat on this approach: Listing the home at the seller’s desired price and then lowering it may create “a slippery slope,” he says. “I understand the mentality behind doing that, but you have to be prepared to take it off the market,” he warns.

4. Insist on repairs to older homes, says Penelope Flaherty, of Future Home Realty in Tampa Bay. She’s found that while upgrades, such as granite kitchen counters, will dazzle buyers, they won’t mean a thing if the home has a leaky roof, a nonworking air conditioning system or other such issue.

She asks sellers to get a reputable inspector. “The buyers today do not want any surprises and will demand big price concessions if there are surprise [repairs],” Flaherty says.

Flaherty’s farm is a waterfront area with homes mostly built in the 1950s to 1970s. About half of the sellers have kept up their homes meticulously—the rest assume that their home’s location will sell itself. She encounters dirty grout, rundown toilets and outdated kitchens. Often, those sellers expect the same prices that their neighbors have received and must be diplomatically told that the property looks derelict, Flaherty says. She politely tells them that they can’t ask for top dollar if their roof needs $18,000 in repairs.

“People have to feel they can walk into something, live there and do the renovations as they wish,” Flaherty tells the sellers.

“Sometimes, you have to walk on eggshells to get your point across.”

5. Tell the story of the “invisible house,” says Cheetah Currier of Keller Williams Realty in Cape Coral. “If you don’t see something, you don’t know it exists, so it’s basically invisible,” Currier says.

Present the seller with this scenario: A buyer has only one day to look at properties. He or she can see only a dozen of the 45 homes that meet his or her criteria. How would that buyer choose that dozen?

Usually it comes down to price. The buyer looks at the homes in the location and price range he or she desires. Emphasize to the prospective seller that the other 33 homes are now “invisible,” Currier says. To make sure your home is not invisible, it must be priced appropriately, she tells the seller.

After price, the buyer chooses homes with the most features, or those in the best condition or location. Currier reveals the number of similar homes in the sellers’ area and then discusses the 12 lowest-priced homes. She compares each home with the sellers’ property, feature by feature.

“With so many motivated sellers, we invariably find that many of the homes are as nice as or better than the home I’m trying to list,” she says. “I find this to be a good reality check for the sellers [who] are reluctant to come to a realistic price.”

6. Persuade the seller to create value in the buyers’ eyes, say Greg and Joan Cook, of Keller Williams Partners Realty of Coral Springs. They’ve been able to turn around homes in 30 to 45 days, while competing sales associates have listings that have been sitting for six months or more. Their secret: persuading the seller to lower the price by 5 to 10 percent below the adjusted comparable price, if other properties in the neighborhood are similar. They’ve been using this method for about a year.

“Our theory is that we have to create value for the buyer by offering more for the same money, or a similar product at a lower price,” Greg Cook says.

He offers sellers the analogy of two car dealerships, each of which is offering the same model for $30,000. The difference is that one dealer’s model has DVD changers, heated leather seats and other amenities. The competing dealer must create value to the buyer by lowering the price of his or her car. Likewise, today’s homebuyer doesn’t see home upgrades as a value but as an extra expense, he tells the seller.

Half of the sellers the Cooks encounter agree to the price reduction—the other half don’t. “One-third walk away completely,” Joan Cook says. “Of the rest [who] don’t agree with us, we take it at their price and test the market with the understanding that we’ll reduce it if it doesn’t sell. Generally, they’re amenable to this.”

“We feel better walking away if we can’t meet the expectation. A lot of [sales associates] will take on the listing and pray the seller will come to [his or her] senses,” says Greg Cook. “Sometimes, even when we offer the home at 10 percent below market, we still have to agree to more of a price reduction. Today, the buyer sets the price.”

Heidi Russell Rafferty is a Kentucky-based freelance writer.