Pricing Strategies and Managing Emotions

I want to share with my blog readers an excellent thread with an out of town client asking me to sell his home: right from the initial idea of selling and all the way through consulting, advising, reporting, pricing, and actual listing. This thread provides some particularly valuable tips related to pricing strategy and dealing with the emotions involved in selling a property that has been held for many years.

I hope you enjoy it.

Good day Mr. Client,

I finally obtained the keys, spoke to both tenants and was able to arrange a walkthrough of the property.

Here are my thoughts.

Market: still very active with well conditioned and reasonably priced properties selling quickly and at full price

Condition: there are a lot of items of deferred maintenance in the property: the roof is totally shot, the sliding doors are ajar and don’t close properly, there are holes in the woodwork and decks, there are some signs of moisture and water penetration in the basement. I have no way to assess the state of the electrical panel and wiring.

The basement is full of the tenant’s stuff (nothing you can do about it as she is a “collector” and has been there for so many years

General condition of the property is poor and will require a lot of updating. There isn’t anything I recommend you improve on at this point as the new buyers will have to do a fair amount and to their own standards and taste.

I would recommend for a home inspection Report to be done ($400) so we know upfront what will come up. It also gives the buyer a great sense of confidence that we are transparent and they cant use a tactic of trying to renegotiate the price once we make a sale and they do their own inspection. It is money well spent and I would strongly suggest we do it

Price: Renovated and improved properties on the street go for about 650k. Here is the link to all the recent sales on the street.

I would suggest a listing price of the range of $530,000-$550,000. in the type of market we are currently having, a seller cant underpriced even if one wanted to as the market will adjust itself (i.e. it will generate more than one bidder and sell for over the asking price). There is a greater risk and danger on overpricing it and then having to adjust the price downward as it till develop the stigma of the property not being desirable and being overpriced.

So I would suggest a lower range than the higher. Perhaps $530,000-$550,000.

There are quite a few things to be done for the new buyer and it need to be reflected on the price. I.e. we can ask the same price as what renovated homes are selling for.

I am attaching a listing agreement for you and Mrs. Client to sign authorizing the property to be listed and marketed.

I left the price blank so you can fill it in and scan or fax back to me.

You are welcome to email or call me to discuss any aspects of the process.

Let me know what questions you may have

Vlad B

Dear Vlad,

I am a little freaked out, I think, maybe because I did not do any business dealing or decisions for many years.

Let alone selling a property that I own for 27 years. 

I have some questions to sort before emailing you the authorizing the listing.

The pricing you mentioned make sense but not to my expectation, I am wondering is there any paint & carpet issues that can have the place show better?

I believe it's the right time for me to sell but I am not in a rush to do so.

I agree to make the home inspection report, Although, I think, the findings can only degrade the price. 

This sale is going to be done on a remote or overseas sell only because I trust you so much.

There is a huge component of psychological effecting my thinking, I was making some plans with the proceeds of this sale based on your previous selling price estimates, positioning the price in the middle around the 600K mark.

I understand now it's not so realistic and aware to the danger of pricing the property to high.

I think I could be happier to start with 550K but will not ask for it unless you approve.

Have to talk to my accountant today too.

Please write what doyou think.

Thanks,

Mr. Client

Email 3 Vlad -to- Client

Hi Mr. Client,
 

I'll address your concerns one by one.

First of all, the distance makes no difference on the decisions one needs to make about the selling process. Weather you live next door or on the other side of the world, it doesn't change the property itself, its condition, the market or the price. Properties around the world are sold daily without their owners living in that particular town.

The most important decision you got to make is about the price: the agent handles all the rest of the details until the offer is attained.

Your expectation of the price is not one and the same as what the market expectation is. We can only set the listing price, but we don't control the selling price, buyers do. If we did control it, I would tell you to list at whatever price you want. But that won't get you far. If you want to maximize the final selling price, you need to list it at market value. Otherwise, as I mentioned, you will detract, not attract the buyers and will only help the competition sell their homes, not yours. If you overprice and nothing happens, then you will have to reduce it, sending the signal to the market that you listed too high and now have to adjust it.

If the property was worth 600k, then I would have told you so. My interest is in getting you a higher, not lower price. But if you were a buyer and could buy a property that is all renovated for pretty well the same price as the one that requires work, which one would you choose? Neither you nor I set the value, buyers do, that's why I sent you the link with the sales so you can see for yourself.
 

We can list it at 550, I don't think it is off the mark.

Changing anything in the property won't make it show any better. Either you make a substantial investment, like installing new roof, replacing the old doors, and a lot of other items that simply got old with age or leave it alone and let the next buyer take care of it. At this point, I wouldn't spend another dime on it, you won't improve it that much to reflect it in a better and higher sale. It is what it is.

As for doing a home inspection, anyone buying this property will do any, or they won't buy it. It is an older house and will need some work. So an upfront home inspection is better as we will know what will come and what to expect. It won't reduce the value in any way, as I said, as anyone buying this home will want one done anyway.

I hope this helps.

Let me know if there is any other information you require.

It is my intention to help you realize the best and highest sale. Some things may not be what you like to hear, but you need to hear them: I have been selling 50-80 homes a year for 30 years and I know how to get the maximum price for any property

Vlad B

Ps. Keep in mind, that the market can surprise us on the upside as well resulting in a higher than expected price.

But if we are going to err, I'd rather err on the lower side than overpricing.

The upper unit shows quite nicely, Raghu keeps it very clean and tidy, and it is a lot more updated than the lower unit.

Anyway, I am positive that we will do well, but timing is everything: the market is hot right now and the home inventory is quite low and the demand is high. But that can change very quickly with spring market and warmer weather.

Hi Vlad,

I agree with your thinking, and trust your judgment, hopefully we'll have an escalation addendum.

We will mail you the signed Listing Agreement with your original suggestion for listing price later on today,

Take care and good luck!

Mr. Client