From Jennifer Gregory:
In the current real estate market, many sellers think their home is worth more than the current market value. Realtors try to find diplomatic ways to break the news about the worth of a seller’s home. They have to help them price the house to sell.
“One of the worst things a homeowner can hear in today's market is that their home is not worth near what they thought it was,” said Lee Wilber with Hilton Realtors in Springfield, Missouri.
These conversations can be tricky and difficult. But if you plan for the conversation, you can lessen the blow of the bad news. Such a conversation can even strengthen the partnership between you and your client.
Understand the seller’s perspective
Before you discuss price with your client, make sure you have a solid understanding of their outlook and situation. The sale of a home is ultimately a business deal, but many sellers have a large emotional investment in the transaction.
Think about the seller's attachment to the home and the role that the house has played in their life. Sellers who are very attached to their homes have a harder time looking at the property objectively.
Next, think about the client's financial situation. Is there a specific amount of money that they need to pay off a mortgage or buy another house? Are they in danger of losing their home and need to sell quickly? By having a solid understanding of your client's situation, you can be sensitive and proactively address their concerns. Help them talk through their options.
Know the facts
When you sit down to talk with your client, bring as much factual data with you to support your price point as possible. Broker Jim Olenbush first explains that market value is determined by recent comparable sales, not the listed prices of other houses.
“If a neighbor has a home on the market at a very high price, that doesn't impact the market value at all," says Olenbush. "The number that matters is what it actually sells for.”
The next step is to show the client the data that backs up your price point. That helps them make a factual decision instead of an emotional one.
Aaron Hall, with the firm Wealth Trifecta, brings a market synopsis with him. He also prints out recent comparable sales, comparable properties for sale and listings that have recently expired.
"If this data shows that the house is currently overpriced, the homeowner sees this in a cooperative and supportive environment," Hall said. "This is how we find some common ground."
To help buyers further understand the market, have information on hand about nearby bank-owned foreclosures and short sales.
“It's important to explain to your seller that these distressed properties do have an impact on their home's value, and need to be taken into consideration,” Wilbur said.
Get a second opinion
If your client is unwilling to change their price or doesn’t believe your data, get a second opinion. Many agents pay for an independent appraisal or offer to split the cost with the seller. An appraisal gives your seller concrete facts about the market value of their house, including the similar comparables.
If the appraisal is significantly lower than the seller’s price, explain that even if you find a buyer willing to pay that price, financing might be an issue. The deal can fall through if the house doesn’t appraise high enough and the buyer can't get financing.
Invite brokers to tour the seller’s house.
“Have the agents write down their true opinion of what the property is worth and show it to your clients,” says Chantay Bridges at Clear Choice Realty & Associates in Los Angeles. An outside perspective often helps a client understand the house's fair market value.
Breaking the news that a home is not worth what the client thinks it should be is never an easy conversation. But, having the data to support your price point lets you help your seller be competitive in today’s market.
Jennifer Gregory is a journalist with more than 17 years professional writing experience. Jennifer blogs for Contently.