There is one skill that I believe truly sets one real estate agent apart from another, that skill is perfectly pricing a home that is getting ready to go up for sale. I believe one of the biggest problems that everyone involved in a transaction deals with is an agent selling the wrong features and selling things that they cannot control when, in fact, they should be selling their knowledge and expertise when it comes to pricing homes. That is, above all, the most important thing that they are going to do.
Now are there other important things that real estate agents do, of course there are. But many of those “skills” simply boil down to the amount of effort they are willing to put out. For example, I do not believe communicating properly is a skill. Also, before you ask, answering phone calls and texts promptly is not a value add either.
What Real Value Do Agents Provide?
There is an article circulating around that is 170 plus things that real estate agents do for their clients that make them worth every penny, which is quite frankly laughable. Some of the things listed in this are things like making an appointment with the seller to list their home or prepare a listing presentation or add a client to your database.
The restaurant equivalent of this would be providing a table for your customer to sit at or providing a menu so that they actually know what food you serve. I know whenever I go to a restaurant and they have actually washed the cups, silverware, and plates I feel that is to be expected and not a value add.
What Agents Can and Cannot Control
There are also so many things that are out of control of a real estate agent that they pretend are in their control. For example, you might have an agent that is an amazing negotiator but they get hired by a client who is incredibly anxious to sell and a home goes for under market value. Conversely, you might have a seller that totally overestimates the value of their property and it doesn’t matter how skilled of a negotiator that agent is, they are never going to get someone to overpay that dramatically.
Don’t even get me started on open houses and broker tours because 99% of buyers are shopping online anyways.
Why Pricing a Home Is So Important
So why is pricing a home so important? Why is that one thing that sets a real estate agent apart? Why not just get an appraisal or two or even three?
Pricing a home is really an art form. It’s a skill that you develop over time. You learn based on market conditions, supply of homes on the market, and your clients needs just how far you can price a home up or down to get it sold on their timeline.
A home appraiser typically has a contract in hand whenever they appraise a home, which is why the home tends to always land on or incredibly close to that number. An appraiser is required to mathematically explain their opinion of value on a property which is easy to do when you already have a number in mind. When you don’t have a number already that is where the art of pricing a home takes over and it’s very hard to create art with a mathematical equation.
The Appraisal Test
If you want to test this hypothesis, hire three different appraisers to appraise your home without a contract in hand and I believe that you will find that their opinion of value varies wildly. However, if you tell them you have a contract on it at a certain number, you would be shocked at how quickly all of their numbers pull together to justify that number.
It’s not their fault and I’m not saying they’re bad people, but just like math in high school they are solving for X (the pre-supplied contract price of the home) as opposed to inventing X out of thin air.
A Good Agent Asks the Right Questions
So if you’re thinking about selling your home, a quality agent should ask you this very important question: “what is your timeline for needing to move.” The reason they should ask that question is because there is the “I want to sell it in a weekend price”, the “I don’t want to sell unless I get a great number price”, the “I don’t care if it ever sells price”, and the “I want to sell it in a reasonable amount of time price”.
Based on what you tell them, they should know how to price your house accordingly. But most importantly, they should be honest if they cannot. For example, we just listed a house here locally where I had to look at the home seller and say, “Quite frankly, I don’t know what your house is worth because it is so unique, with so many features that are so abnormal and that many won’t need, but a select few buyers would absolutely LOVE, in a location with a tract of land that it was impossible to give an accurate value. At best, we gave an educated guess.” It’s always better to be honest than make something up.
Best Tips for Home Sellers
If you are a home seller these are my best tips for you:
- Interview multiple agents and make sure they all provide you a market analysis.
- Be honest and look up those homes and compare yours to theirs. Ask yourself, “If I’m a home buyer, which house am I buying?”
- If an agent promises you an impossible number with a very quick timeline…be careful.
- If they promise, for example, a number much higher than you thought you would get within a month, then sign a one month long listing agreement. Force them to deliver on their promise. If they refuse, show them the door.
- You could also offer to pay based on results. If they give you an acceptable offer within 30 days, pay more commission. If it takes longer, pay less.
- If they promise to get you an unrealistic number, offer to pay them a tremendous commission. But if it sells for less, pay the agent less.
Read our article on Should You Use a Discount Real Estate Broker.
Final Thoughts
Holding their feet to the fire, when it comes to being able to back up some of the promises that they make, will tell you very quickly whether they actually believe they can do what they’re pushing or whether they are trying to get you to sign up for something that you might later regret.
Knowing how to price a home based on a client’s timeline and other market conditions is the one skill that is difficult to master but most important when it comes to selling homes. Choose your agent wisely.
