How to Lose a Listing

November 14 2013

dohWhen we took our daughter trick-or-treating at our neighbors' house on Halloween, they dropped a bomb on us. They're moving! (Cue Mozart's "Requiem in D Minor") As we drowned our sorrows with the baby's stash of candy, they told us about their decision. Besides my sadness at losing them and my trepidation about who will move in next, the most powerful thing I took away from our conversation was the interesting way a local agent lost their business.

Defend Your Listing Price Recommendation

Like most homeowners, my neighbors had a very definite and, in my opinion, slightly inflated idea about the value of their home. They figured it at about $600,000. When they started thinking about selling, they chose three agents to meet with.

The first agent they spoke to was the person who had helped them buy the house (we'll call her "Agent One"). She told them that she'd list the house at $425,000. When I asked how Agent One had explained her recommendation, my neighbors responded that she hadn't offered any substantive explanation at all. Even after she learned how dramatically her recommendation differed from the number they had in mind, she didn't take the initiative to defend or justify her price.

Surprised and upset, the homeowners then spoke to two other agents (we'll call them "Agent Two" and "Agent Three"). The new agents each came in with a listing price at around $550,000.

Now, my neighbors really like their original real estate agent, Agent One. They wanted to work with her again. But they tell me that they probably won't choose her to list their home. This is pretty catastrophic for her, whether she knows it or not, because repeat and referral business is a real estate agent's bread and butter.

The Moral of the Story

To be clear, the lesson here is not that you should meet any seller's inflated listing price expectation. It's all about educating them, not bowing to them. In my opinion, Agent One could have won the listing if she'd done some research before the listing presentation, adjusted her recommendation based on that research (because she was unreasonably low), and given the homeowners a report of some sort.

Tools to Help

Agent One didn't have to be on her own here. The market is full of technology tools to back you up during difficult pricing discussions.

Realtors Property Resource® (RPR®)

I've been writing a series of case studies about RPR® and I continue to be impressed by the helpfulness of this tool. Agent One, as a member of the National Association of REALTORS®, has free access to RPR® and didn't leverage it. The RVM® is the name RPR® gives their price estimate, and everyone I've interviewed finds it to be generally accurate. In this case, the RVM® of my neighbors' property is $548,330, which makes me think that Agent Two and Agent Three were smart enough to take a look at RPR® before they gave their listing presentation.

If I had been the good angel sitting on Agent One's shoulder, I would have whispered into her ear that she should look up the property on RPR®, adjust the RVM® to reflect the improvements the owners have made, and print a Seller's Report to show them how and why she came up with her price.

To learn more about RPR®, read our case studies or visit our product directory.

Comparative Market Analysis (CMA)

I'd also suggest to Agent One that she invest in a CMA tool. CMAs allow agents to create attractive visual reports that discuss comparable properties, market conditions, and other factors to back up listing price recommendations. If Agent One had been in a hurry, or had not been given much time to prepare for the presentation, she could have banged out a CMA in moments. Most modern CMA tools allow for pretty hands-off report creation if you're so inclined.

I've done some writing for Cloud CMA, so I'm very familiar with their product and it certainly could have come in handy here. I like that it offers the flexibility to create a variety of different reports and customize them extensively, so you can truly cater your finished product to the seller you're meeting with. In this case, Agent One knows my neighbors well, so she could have created something that was right up their alley. And she could even have created an interactive CMA that she could show them right on her iPad.

To learn more about CMAs, read articles or visit our product directory.

BrokerMetrics®

Terradatum also has tools that Agent One could have used to justify her recommended listing price. With those tools the agent could have a discussion about the value of pricing at the market, above the market, or below the market. Consumers usually don't, but absolutely should, understand that pricing a home below market value often results in multiple offers, fewer days on market, and ultimately a higher price with fewer contingencies. Perhaps Agent One was considering pursuing such a strategy and that is why her listing price recommendation was so low, but she did not explain it or support it with evidence.

Seasoned agents know all of this, so this may seem like a sophomoric concept. But consider it a gentle reminder that if you are not using great tools, if you have been too busy to embrace the role of technology in real estate, you may very well wind up like Agent One.