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The 5 Perspectives of Pricing
By: Sharran Srivatsaa, Author's original work
In this article, I’ll give you the tools and tactics to think through and present the five perspectives of pricing to either a buyer or a seller, regardless of what the situation might be.
These are the two things that most agents do; they feel they know the neighborhood and the pricing around it; and/or they go straight to logic. But I want to offer you five different perspectives that you can use as a source, framework, and guide for having conversations with buyers and sellers.
So let's walk through them:
Perspective of an Agent
What does this mean?
This is where you know the history of the market and current market dynamics, and you know the ongoing relationship between the active, pending, and sold. You also know about current market trends, what buyers like and dislike, how many buyers there are, if the neighborhood is trending or not, what mechanics are in place, if the environment is seasonal or not, if it's adept period or not, and when you should and shouldn't grow the market. You should also know about any rules that may have changed.
Pricing from an agents perspective is essential. Generally, it's the way you lead a conversation. You can say, "Mr. and Mrs. Seller. Given my 'X' amount of years listing, and selling homes in this neighborhood, let me walk you through five stats that you may not know. Over the last five years, 'this' has been the rise in inventory, and 'this' is the rise in the average sales price. Here's the change in buyer demographics, and the rise/fall of days on the market; and the number of properties bought for cash versus financing, are 'X' and 'Y'. Currently, there are seven active, four pending, and six sold in the marketplace."
We're able to give them a perspective, followed by a price; however, you should continue by saying, "Listen, Mr. and Mrs. Seller, every potential buyer walking into the home, may not look at it this way, so let me tell you about another perspective."
Perspective of an Appraiser
"Given the fact that 83% of the homes in this neighborhood are financed, having the view of an appraiser is important. So, if I were an appraiser walking through this home, I would see five truths."
The truths that you observe might include the location of the home. Is it by a school or train tracks? Is on the right side of the main highway, or the left? We should know how appraisers work because this perspective is crucial to the whole outlook of pricing.
It's a time where we can say "Mr. and Mrs. Seller, as your adviser and listing agent, I don't leave the appraisal to chance. Even though it often ends up being the perspective of the buyer, I as a listing agent, represent you. I want to make sure there's an offer we accept, and that the home appraises and does well. And I want to make sure that the appraiser has the necessary information to get the desired results."
Then, you could talk about the horror stories that you went through, when, let's say, you were representing a buyer, and the listing agent never showed up. Or, the appraisal came back much lower than the accepted offer price and torpedoed the deal. Bringing up related, true stories, like this, shows your value as a trustworthy advisor; that's why the perspective of an appraiser, is critical. You as a listing agent can bring the necessary tools, resources, CMA's, market dynamics, etc. to help the appraiser evaluate the property the way they want, and to provide them the right bases of information as to why the offer was accepted in that range.
It adds a lot of value to talk about that. I'd say that probably eight out of ten appointments, I've seen the listing agent rarely brings up how they're planning on working with appraisers.
Perspective of a Contractor
This is a very important perspective that you can use objectively, without insulting the client. You can say "Mr. and Mrs. Client, I want to talk to you about the perspective of a contractor. Pretend you were buying this home, and you were walking through it with a general contractor. It would be a good idea if you and I walked this home together, and we identified the areas that need some TLC so that during the process, it's not a shock to us.”
A general contractor walks through the home looking at how to make it better; so now, you've framed the reason why you call certain things out because you're using their perspective. You may say that the hardwood floors in one room needs to be replaced, or maybe the client needs new appliances, and you can point it out without coming off as offensive.
Do this without actually giving your perspective as an agent, because that can bother clients. A lot of times, clients will ask you, "How can agents actually believe that they can be great marketers, great salespeople, great negotiators, organizers, interior designer, contractor, etc.all in one?" And they have a point. Sometimes, we try to cram way too many things together, and it's a lot of hats for us to wear. Our clients know when we take on too many things, we start to become mediocre, and it's okay to call this out. And the easiest way to deal with this is to say, "Okay, let's walk this property." And do it with a contractor maybe.
I remember there was this very high priced appointment, over one-hundred-million dollars, a few years ago, that I was at, and we actually brought an appraiser to the meeting. When the topic came about regarding pricing, it was a very easy conversation, because all of us just turned and looked at the appraiser and said, "Hey Mr. appraiser, if you appraise this today, what do you think it'll be worth?" And the burden of pricing was completely taken away and placed on the appraiser and the seller.
Perspective of a Prospective Buyer, Walking in for the First Time
Bring this perspective up, only after the first three.
This perspective is a powerful frame because we all know that the way to sell homes, is to generate showings, then the showings generate contracts. The number one job for what we have to do is to generate as many showings as possible. If there's a marketing plan in place that doesn't generate showings, then we are doing our clients a disservice.
The very byproduct and output, of generating showings, is getting buyers to walk the property for the first time. So, to get the ball rolling, we should say, "Mr. and Mrs. Seller, if you could pretend, just for a moment, that if I were a buyer, walking the property for the first time, what would I see, and appreciate?" You can present this in so many ways. You could say, "Why don't I walk through the home, and you show me around? And I'll point out what a modern buyer may see." Or you can say "Why don't I bring my assistant or one of my buyers through, and we can get their live feedback while they walk through this home?"
A lot of times, sellers may or may not appreciate that, given an intimate setting, because sellers and homeowners are very protective and sensitive about who they let into their home, and the feedback they get from others around it. But, if we don't have the conversation of what a potential buyer may see when they walk in for the first time, then we're doing everyone a disservice.
This is the time where you can say, "As a buyer's agent, they'd advise a buyer to look at 'this,' and as an appraiser, they'd advise a buyer to look at 'this.' Lastly, as a general contractor, they'd advise a buyer to look at 'this.' You have no idea what kind of buyer is walking through the door, what type of hat they wear, nuances and experiences they have, and what they're upgrading from. Maybe they're coming from a rental or a dump, or maybe they're coming from a big home and trying to downsize; so we don't know their perspective.
The perspective of the buyer is vital to the pricing process because they're instantly going to a feature value comparison.
Perspective of a Homeowner
We now have the ability to talk to the homeowner and say, "Mr. and Mrs. Client, you're very kind for allowing me to talk about the many different perspectives. From the perspective of an agent, I shared with you the market dynamics, the history, how the market is functioning today, and where we sit in today's seller's market. I've talked to you about the perspective of an appraiser and how they think, and what value I can bring to an appraiser, doing the process as and when we accept the offer. I've talked to you about the perspective of a contractor. Looks like you have a beautiful home, and it's been redone well. Are there any upgrades that you've done, that we need to know about and catalog, so potential buyers are aware of them?'” (Or however, you may say that, based on state law.)
“We've also walked through the home, and thank you for allowing me to do that, to look at this through the eyes of a first-time buyer. We were able to see what they see, and the curb appeal that they notice. And we were able to go over the blind spots you and I may have, that a first-time buyer does not. What are they looking for in today's market? Can we make some minor adjustments, just in the staging, perhaps, to help neutralize anything that may not be the right fit?"
"But most importantly, Mr. and Mrs. Client, your perspective on pricing, is notably valuable for various reasons; because my job is to bring you a buyer who will write you an offer, for the price that you want, with the terms that you want. But I need to ask, when you think about pricing this home, apart from what you think it might be worth, what are the other factors that are important to you?"
"Do the terms matter? Do you have a number in mind? Is the amount that you net from here, going to result in a purchase somewhere else? If you had your best wishes, and everything went as planned, how long do you think you want this house to be on the market?”
"Seventeen days? Great. At the end of seventeen days, when it's under contract, what price will be on that contract? $1,600,000.? Awesome! If we get you using our marketing plan, and under contract in seventeen days, and get you $1,600,000., do you believe that we would have achieved our goals? Yes? Fantastic!"
That's really good. You can actually lead them down that path, and discover what it is they want. Because unless you frame the first four perspectives of pricing, then the fifth perspective, their own, won't be framed well; and they won't have any context for thinking about it, because everything they've seen thus far, would only include a messy collection of data points. From flyers and knocks at their door to home evaluation websites they've clicked on, or random signs they've seen on their neighbor's lawns. So, they end up collecting scattered, unsolicited data points; then it becomes our job to bring the four perspectives together, and give them the most important one, which is the perspective of the homeowner.
There are so many ways in which you can use this. Maybe it'll be in an appointment, or perhaps with a buyer, or seller. But instead of approaching the pricing with what you think it may be, then trying to have the CMA back it up, I think there's a great opportunity to provide a discussion around the different perspectives. And every seller we've talked to about this has always appreciated it.
Now, this is just the tip of the iceberg on pricing, but one of the guaranteed questions that we're going to get asked in the living room is regarding pricing. So, having a choreographed answer that allows for a framework of robust thinking, makes you stand apart from every other agent out there; and it's the key to creating a great adviser based relationship, and not just a transactional one.
Sharran Srivatsaa is the CEO of Kingston Lane, a push-button technology execution platform for real estate. Most recently, Sharran grew Teles Properties by 10x in 5 years and led its acquisition to Douglas Elliman.
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