Step-by-Step Guide to Pricing Strategy Progression

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Step 1: Identify and Address Pricing Fears

Begin by understanding the seller’s fears and frustrations related to pricing:

• Common Fears:

  • Underpricing

  • Short-sightedness about the timeframe

  • Seller's reluctance to stage the home

  • Reliance on online estimates like Zestimate

  • Preconceived pricing by the seller

  • Desire for an unreasonable price

  • Comparisons to neighbor's sale

  • Comparing offers from other agents

  • List price versus selling price confusion

Step 2: Avoid Common Mistakes

Recognize and avoid the three cardinal sins when discussing pricing:

1. Jargon: Avoid terms like "comps." Instead, explain market comparables simply and clearly.

2. Setting a Price: Focus on the strategy rather than dictating a specific price.

3. Promising Outcomes: Don’t promise a specific sale price; instead, emphasize the pricing process.

Step 3: Responding to Seller Statements

Prepare responses to common seller statements:

• "You are the expert, you tell me."

  • Response: "Thank you! I am excited to tell you about this."

• "My neighbor sold for 1.1 million, my house is worth more."

  • Response: "Well, let’s look at what the market tells us now."

Step 4: Introduce the Pricing Framework

Engage the seller in a collaborative discussion about pricing using this framework:

1. Market Data: Show them the relationship between active listings, pendings, and solds.

   • Emphasize pendings as commitments and actives as competition.

2. Seller’s Needs:

   • Ask about their ideal move-out date and any financial considerations.

   • Ensure the discussion is empathetic and understanding of their timing and financial goals.

3. Collaborative Pricing: Emphasize that pricing is about positioning and invite their collaboration in setting a strategy.

Step 5: Explain the Three Truths of Pricing

Educate the seller about the three truths:

1. Market's Role: The market determines the value based on data.

2. Seller’s Role: The seller defines their needs and wants.

3. Your Role: You guide them to achieve their goals.

Step 6: Present Market Data

Show the seller the relevant data:

• Actives: Current market prices of similar homes.

• Pendings: Homes under contract, which indicate current market commitments.

• Solds: Recently sold homes, representing past market performance.

Step 7: Discuss Seller’s Requirements

Ask detailed questions to understand the seller's situation and preferences:

• Timing: Ideal move-out date, lease timelines, or new home purchase plans.

• Financial Goals: Any specific numbers they have in mind, whether due to outstanding loans or desired profit.

• Emotional Factors: Understand any personal reasons behind their price expectations.

Step 8: Choose a Pricing Strategy

Outline the three pricing strategies:

1. Perceived Market Value:

   • Based on the current market data (actives, pendings, solds).

   • Considered standard and data-driven.

2. Aspirational Pricing:

   • Used for unique properties (e.g., cul-de-sac, lakefront).

   • Tests the market for potentially higher value.

3. Event Pricing: Useful in a slow moving market when their is a lot of inventory

   • Slightly below market to generate high interest and quick offers.

   • Useful in a fast-moving market with limited inventory.

Step 9: Recommend a Strategy

Based on the current market and the seller’s needs, suggest an appropriate strategy:

• Perceived Market Value: If the market is stable and homes are selling quickly.

• Aspirational Pricing: If the seller is not in a rush and has a unique property.

• Event Pricing: If the seller needs a quick sale or the market is very competitive.

Step 10: Collaborate on the List Price

Help the seller understand the pricing range and collaborate on setting the list price:

• Anchor and Invitation: Choose a price that sets a solid baseline but also invites offers.

• Avoid Psychological Pricing: Recommend round numbers (e.g., $800k instead of $799k) for better search visibility.

Step 11: Recap and Adjust

Recap the agreed strategy and remind the seller about the flexibility of pricing:

• Review Day: Ensure the seller understands there will be a review day before listing goes live.

• Market Dynamics: Explain that the listing date and price may need adjustment based on the latest market data.

Conclusion

Summarize the collaborative process and ensure the seller feels confident and involved in the pricing decision. Remind them that the pricing strategy is dynamic and responsive to the market, ensuring the best possible outcome.