Key 3. Preview Marketing
One question for the vendor is how to establish whether an offer is a fair market price. Vendors will often be prepared to sacrifice a few percent of “potential market price” for the convenience of a quick sale and avoiding possible months of uncertainty, holding costs, presentation costs and the wide public exposure of their property, especially if they are still living in it.
If they can be assured that the early offer is a good price there are many incentives for accepting it. We believe preview marketing is the key to ensuring early offers are credible. To achieve this you, and your colleagues, need good databases and to be able to document your proactive marketing processes.
One reason properties stay on the market for months is that they are overpriced. The vendors’ expectations are higher than those of the buyers. These properties can become pinball listings that buyers visit and bounce off when they find there are similar properties available at more competitive prices.
An interesting aspect of this has been uncovering how these properties come to be overpriced. Vendors now have access to many sources of information on the potential market value of their properties. These include Property Insights and Homes.co.nz assessments, which reflect the overall market appreciation since the last sale; although these can be several months out of date and have not included an assessment of the current condition and any home improvements since the property was purchased. Nor does it take into account whether the property was well marketed when last sold or if the purchasers achieved a bargain at the time they bought it. It is worth noting that only registered improvements will be reflected in a rateable valuation unless it has been specifically revised at the owner’s request, and any loss of condition or lack of maintenance will be ignored. Vendors can also go to local open homes, get details of the sales of comparable properties in their area from real estate agents and, most crucial of all, invite local salespeople to appraise their home.
This opens the door wide to the greatest source of overpricing - the varied opinions of real estate salespeople. We have done some research on how widely these opinions can vary. When a new property comes on the market the real estate firms call this a “new listing” and to ensure all the salespeople in the office are familiar with the new listings the office organises agents’ viewings, often as a group on a particular day of the week. These agent viewings of the week’s new listings are called caravans. During or after the caravan salespeople discuss what sort of buyers should be invited to the property and are often asked to record their estimate of what the property will sell for. Their opinions on what the market price for the property is can vary markedly.
You could show your vendors written evidence of how wide the range of estimates can be. In this situation there is nothing riding on the estimate for the salespeople, they will have all been seeing the same comparative properties in the office caravans. They will all be aware of the same recent sales in their market place. They will probably have in mind particular buyers that they feel the property would suit and have a rough idea of what those purchasers are willing to pay. They are people with the widest knowledge of their local market and still our research indicates their estimates can vary by as much as twenty percent on any particular home.
So in the event that a vendor calls in one salesperson from each of several competing real estate firms, where the salesperson who lists the property can get a commission and everyone else misses out and the vendor insists on a price assessment, there is a huge upside bias. The salespeople have every incentive to maximise their price assessment in order to secure the listing in a competitive situation.
The profession even has an expression for exaggerated appraisals which they call “buying the listing”. Even if all salespeople who appraise the property act with superhuman integrity it is likely the price the vendor prefers is the one at the top of the range. If they choose the salesperson to market their property based on that assessment then they are locked in to a situation which can rapidly lead to their property becoming a “pinball” listing.
Their salesperson has a great deal of difficulty fronting up to the vendors when they are the one responsible for overpricing the listing.
For most salespeople a pinball listing is better than no listing so one of the first things they ask a vendor is what work or opinions they have already developed on price and if a strong opinion is expressed the salesperson’s best option is to agree with it. You as a salesperson should be able to use CMAs to illustrate the market as you see it, and also show detailed flyers on recent sales, and SalesPartner reports illustrating what you or your team members did to sell similar properties.
SalesPartner makes it easy to print full detail flyers of sold properties that are included in your CMA. These flyers are ones that would have been given to interested buyers during the marketing of the property but when printed from your SalesPartner would now have your photo and contact details on them, no matter who listed or sold the property. We suggest that you note the sale price achieved on the back. With these flyers you can refine your vendors’ knowledge of current market prices by asking them to assess what they think the property sold for, before revealing the price achieved. We call this “the price is right game” and it is worth bringing it into play whenever you are reviewing price with your vendors.
With SalesPartner you can add summary reports of the marketing activity for your recent sales and with a notebook or computer in the interview room use rolling picture shows to illustrate sold properties from the Gallery. This is a very useful process in some circumstances.
Often, vendors have not visited the properties that have recently sold in your area while they were on the market, and now that they have sold your vendors are not able to visit. However the perceived price for which the property sold, may have reinforced their price expectations. If your firm sold the property, and you have kept the full set of photos taken for the marketing in that listing’s media directory in SalesPartner, you can take your vendor or buyers through the property using the rolling picture show options. This is the best alternative to visiting the property.
Pricing is not an exact science and even your colleagues will likely have a wide range of estimates on a particular property despite having all these photos available to them. So we believe you should not contradict the vendor’s opinion on price directly, as other salespeople could achieve the listing by simply confirming it.