The Pricing Conversation With the Seller – Agents Advantage Real Estate Academy

A completed CMA is presented, not announced. The seller who hears a figure first and the reasons second tends to measure each reason against the figure; the seller who follows the evidence in the order it was built arrives at the range before it is stated and recognizes it when it is. This lesson sets out the order in which the office presents the evidence, the questions that arise at each stage and how the analysis answers them, and the documents the office standard calls for in the seller’s hands, and in the listing file, before a listing goes to market.

The order of the evidence

The presentation follows the order of the work. The subject comes first: its living area with its source, its condition rated on the same scale as the sales, its site, its features, confirmed with the seller before any sale is mentioned. A seller who has agreed that the house is a 2,000-square-foot colonial in good but not updated condition has agreed to the terms on which it will be compared.

The market area comes next: where buyers of this kind of house look, and why a sale across the parkway or in the next town is not on the list. Then the closed sales, one at a time, each described as a house the seller can picture, with the differences between it and the subject named and the adjustment for each explained in plain words: the sale on the street was seventy square feet larger, and buyers in this segment have paid about $90 for each additional square foot, so its price is reduced by that amount to stand in for this house. The adjusted prices follow, and the reasoning that weights the sale on the seller’s own street most heavily. The range is generally stated then, after the sales.

The pendings and actives follow, in their own tables, with the sentence that positions the list price. The absorption and trend figures for the segment come last, with the checkpoint dates and what will be measured at each. The recommendation the seller hears is the last figure in the presentation, and by the time it is stated, the seller has seen the facts that produced it.

The questions that arise

Certain questions arise in nearly every pricing conversation, and the analysis, presented in that order, contains the answer to each.

“But the neighbor got $478,000.” The first question is whether the sale is in the grid or in the list of sales set aside, and a completed CMA ordinarily has it in one place or the other. If it is in the grid, its adjusted price is already part of the range, and the differences between the neighbor’s house and the subject explain the distance between the sale price and the adjusted figure. If it was set aside, the reason is written: it closed ten months ago, it is a remodeled house, it is larger, it carried a seller credit, or it is outside the market area. Sometimes the figure the seller heard is the list price, or a rumor, and the closed price in the record is different. In each case, the answer is ordinarily a fact from the analysis rather than a disagreement with the seller.

“The online estimate says $486,000.” An automated estimate is a model applied to public records; it has not seen the house, does not know its condition, and is not a sale. The analysis answers with the sales, which are the record of what buyers in the segment have paid.

“We put $60,000 into the kitchen.” The grid’s condition adjustment is the market’s answer: it is what buyers in this segment have paid for the difference between an updated house and one that is not, measured from pairs of sales. Cost and market response are different figures, and the analysis reports the second.

“Let’s start high; we can always come down.” The segment’s absorption figure, its median days to contract, and the checkpoint dates are the answer. The listing will be measured against the segment at day ten and day twenty-one, and the reduction policy states what follows if the measurements point to price. The segment’s showing figures for new listings show what the first two weeks are worth.

The seller’s decision and the record

The seller chooses the list price. The agent recommends, and the office records both. Where the seller chooses a price within the range, the CMA supports it and the file shows why. Where the seller chooses a price above the range, the file shows the range, the recommendation, and the seller’s decision in the seller’s own words, with the checkpoint dates and the reduction policy acknowledged, so that the conversation at day ten begins from an agreement rather than from a surprise.

What is left with the seller

The office standard this course teaches calls for the following to be left with the seller and placed in the listing file: the written CMA, with the subject data sheet, the grid with a source beside every adjustment, the reconciliation with its weighting in words, the three tables of closed, pending and active listings with the position sentence, and the segment’s absorption and trend figures; the price range and the list price recommendation in writing, in those words; the two checkpoint dates and the measurements that will be read at each; and the seller’s chosen list price, recorded with the recommendation beside it where the two differ. A pricing conversation that ends without those documents in the seller’s hands has not been completed, whatever was said.

Application

The CMA for 42 Ledgewood Drive is presented. The seller is taken through the subject, the market area and the three sales, and the range of $452,000 to $462,000 and the recommendation of $457,900 are stated. The seller says that the house on Alder Court closed at $478,000 in the fall.

The list of sales set aside is turned to. The sale at 3 Alder Court is on it: under contract ten months ago and closed nine months ago, remodeled kitchen and baths, 2,150 square feet, with a $9,000 seller credit whose effect on price, measured from matched sales in the segment, was about $7,500. The seller is shown what the sale would have indicated had it been used. Removing the credit’s effect gives $470,500; bringing it forward ten months from its contract date at the segment’s 0.2 percent per month adds $9,400, to $479,900; the remodeled condition, which buyers in the segment have paid about $15,000 for, is subtracted, to $464,900; and the 150 square feet of extra living area, at the segment’s rate of $90 for each square foot, is subtracted, to $451,400. The neighbor’s sale, corrected for its differences, indicates about $451,400, just below the bottom of the range, so it supports the range rather than the seller’s figure; it was set aside only because three more recent and more similar sales were available. The seller has seen the arithmetic, and the question is answered by the analysis rather than by assurance. The seller chooses $459,900, inside the range, and the file records the range, the recommendation, the seller’s choice, and the checkpoints at day ten and day twenty-one.

Summary

The pricing conversation follows the order of the work: the subject agreed first, then the market area, the sales with their differences and adjustments in plain words, the weighted range, the pendings and actives with the position, and the segment’s absorption and trend with the checkpoint dates, so that the recommendation is the last figure the seller hears. The questions that arise, the neighbor’s sale, the online estimate, the cost of the kitchen, and starting high, are ordinarily answered by a fact already in the analysis. The seller chooses the list price, the office records the choice beside the recommendation, and the written CMA, the range, the checkpoints and the recorded decision are left with the seller and placed in the file.