What to do when you have a problem setting the list price of a property?

Do your homework, provide not just avail/sold comps, cover the expired/withdrawn comps too. Call them MARKET REJECTS with clients; explain these are properties rejected by the MARKET.

Next get a US $100 bill (not a $20 or $50) out of your wallet, wave it in front of your client, and show it as beautiful and wonderful. Explain it is REAL, not counterfeit and the questions to follow are no gimmick or trick.

1. Ask the client, if you gave them the $100 would they take it?

They all say YES, and they reach for it.

2. As you take it back, ask, them if it were for sale for $50, would they consider buying it?

50% will say NO. Explain its no trick; ask them again.

Now they say sure! Now explain, the problem is (and point at whoever is near, if no one is around, point at the air), so will she and he, and her, and… they may even be willing to pay $55, $70, $85, even $96.

3. As they show understanding ask, WHY?

They will all give some variation (listen close for insight) it all comes down to VALUE.

4. As you agree with them, ask, would you pay $200, or $125, or just $105 for this $100 bill?

100% they say NO WAY.

5. Again, as you agree with them ask, WHY NOT (with extreme sarcasm)?

Again it comes down to VALUE. They will NOT pay more than $100 because it is NOT worth more than $100, it is important that you repeat that back to them.

“If I understand you correctly, you would pay $100 for the $100 bill, but not more than $100 because of value”? WAIT FOR A REPLY, STOP TALKING, JUST HOLD THAT $100 BILL IN FRONT OF THEM!!!

Now explain this is because that the market, not US (bring them into the situation) set the price of a $100 bill at $100. It sounds stupid, but everyone can relate to the value of a $100 bill (that is why you should always carry on with you at all times).

Now explain, people will pay less for a product because they perceive it as a bargain but, no one will pay more for a product because then the perception is the consumer would be OVER-paying. In other words, paying more than the product is worth.

Now, let’s use Real Estate, and say, your property is $100,000.

1. Ask, if the MARKET, not me or you, said the value of your house is $100,000 would you pay $50,000?

They say SURE.

2. Now ask WHY?

They will time jump straight to VALUE. If not, express their words into one word, “would you agree it comes down to VALUE”?

3. Now ask, if the MARKET, again not me or you, said the value of a given house was $100,000 would you pay $150,000?

100% say NO WAY !

4. Now ask, but what if it had gold plated faucets and ceramic tile and stainless appliances, etc?

Their answer will still be, it is only worth $100,000

NOW YOU HAVE THEM. In 3 to 5 minutes of role play they now understand the concept of value vs. pricing.

LAST QUESTION (it is critical this is asked no doubt in your voice)…

“So tell me, now that you understand the way the MARKET sets values, not you and not me, would you want to price your property at or above the market price”?

One of two things will happen, you will get the pricing that will work or you agree to go separate ways. I no longer have conflicts with sellers (or buyers, I use a variation to explain how lowball offers are a mistake). AND I am prepared to walk away from a potential seller or buyer. It is just not worth my time to try and make potential clients see the “light.” They will always be fighting you every step of the way and that I’ve found is just too draining.

BTW, if you have a client talking about what they paid for the home or what the owner paid, you can add the following when talking about the $100 bill:

Ask them, does it matter what I paid for this $100 bill? If you can get it for $50, would you care that I paid $25 for it? What if I paid $150 for it, would you care? NO… You don’t care about my loss; the MARKET set the price. What I make or lose has ZERO to do with what the MARKET will pay for any product.