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About This Episode
The days of putting a home on the market and watching it sell almost immediately (and for inflated prices) are coming to an end. Price reductions are on the rise in many markets. As the market changes, the way you talk to sellers about how to price their home should change, too. This week on The Walkthrough™, Aaron Novello says it’s your job to help sellers understand the reality of this changing market. He’ll share his exact scripts with six essential phrases you can use to help your sellers understand the value of their home.
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Links and Show Notes
- The Novello Group – Aaron’s real estate website
- Elite Real Estate Coaching – Aaron’s coaching website
- Aaron’s HomeLight agent profile
- Being Mortal by Atul Gawande (book mentioned in this episode)
- Winning the Listing Appointment, Part 1 (Aaron’s appearance on The Walkthrough™ in 2020)
- Winning the Listing Appointment, Part 2 (Aaron’s appearance on The Walkthrough™ in 2020)
- Join our Facebook mastermind for The Walkthrough™ listeners
- HomeLight’s Agent Resource Center
- Follow and listen to The Walkthrough™: Apple Podcasts/iTunes | Spotify | YouTube
(SPEAKER: Matt McGee, Host)
Matt: For most of the past two years, this is what it was like when you put a new listing on the market.
[sound effect: auctioneer]
Matt: Let’s be honest, you and your sellers haven’t had to do much to sell their home. I remember last summer on the show, we were talking about homes getting 50, 75, even 100 offers. Well, times are changing–quickly in some areas. Homes no longer sell themselves. In our Facebook listener community, Nancy Reynolds, an agent in California–in fact, you might remember her name. She was my guest for a great episode last fall. Well, she said recently that one of her clients asked, “Do you think my home will sell?” I mean, talk about a 180-degree change.
My guest today says when the market changes, you have to change your approach to the pricing conversation. It’s your job to help the seller self-discover the reality of what their home is worth today.
Aaron: What they want is they want information, options, and professional guidance. But they also wanna feel like they’re in control of their decision. So that’s the whole premise behind these phrases that we use, behind the kind of approach around the pricing conversation.
Matt: That’s the voice of Aaron Novello. And did you hear what he said there? These phrases we use. Today, we’re gonna break down six essential phrases to help guide your sellers to success during the pricing conversation. This is The Walkthrough™.
Matt: Hey there, how are you? My name is Matt McGee. It’s great to have you on board for another edition of TheWalkthrough™. This is a weekly podcast, new episodes come out every Monday. This is the show where you’ll learn what’s working right now from the best real estate agents and industry experts in the country. At HomeLight, we believe in real estate agents. We’re here to explore how great agents grow their business, stand out from the crowd, and become irreplaceable.
I don’t know how it’s going in your market right now, but here in Tri-Cities, Washington, I have never seen as many price reductions as I’ve seen in the past two months. I was looking last week, in fact, out of 100 active homes priced between $450,000 and $550,000, 40 of them have had a price drop, 40%. Seems to me it’s time for sellers to get a reality check and for agents to do a better job delivering that reality check. I think my guest today would agree with that.
You might recognize Aaron Novello’s name. He was on the show back in Season 1. We did a two-part series on winning listing appointments. Two of the most popular shows we’ve ever done. Aaron leads a small team in the Fort Lauderdale, Florida area. In his 16 years as an agent, Aaron has sold more than 2,000 homes. He’s closed more than 100 per year by himself for 12 years running. By the way, he also has about 100 agents in his coaching program, as well.
On today’s show, Aaron is going to share how he’s changing the conversations that he has with sellers about price. So listen, as we talk about how he’s bringing today’s economic conditions into that conversation, how he gets the seller to see the reality of what their home is worth. And we’re going to unpack six essential phrases that Aaron uses in his scripts when he’s having the pricing conversation. Now, I know you might not be a huge fan of scripts, some of my listeners love scripts, others not so much. Even if you are not a big scripts agent, even if you don’t wanna use an exact script, these phrases will still help you as you talk with your sellers about price.
As they say in the commercial, “But wait, that’s not all!” Did you notice that this episode runs a little longer than normal? Be sure to stay tuned to the very, very end of the show. Aaron and I also talked about another important conversation, the one you have when it’s time to lower the price. If your seller isn’t accepting the reality of an unsold home, some of those same phrases can help you convince them that it’s time to drop the price.
That will be a bonus segment, it’s going to run about eight or nine minutes, and we’re going to add it on to the very, very end of today’s show. Sounds good? All right, let’s dive in. How to talk about price in this changing market and six essential phrases to help guide your sellers to success. Here’s my conversation with Aaron Novello.
Matt: Aaron, you run a successful coaching program. You are working with agents who’ve been in the business for what, three, five, maybe 10 years even? They’re successful agents, but the market is changing right now, the conversations that they’re having are changing with sellers. How are you coaching them through this? What are those conversations like?
Aaron: What I’ve learned is something that’s very simple, which is that in this business, what we do doesn’t change. How much of it we do, and how we do it is what changes. And that’s based on the context of market conditions. So as market conditions begin to change, and I don’t want to use the word “shift” because everybody says that, it makes me want to throw up on the floor. As they begin to transition, right, which is a normal gyration of markets, what I’m also aware of is that we have a whole generation of real estate agents that have never experienced a market gyration. If they’ve been selling real estate for five years, or even six or seven years, they’ve never experienced, you know, market conditions changing or interest rates changing rapidly in short periods of time, and influxes of, you know, demand and supply and changes in those areas in a quick period of time.
So if we’re honest with ourselves, really honest, it’s like over the last two years, how skilled have you had to be as a real estate agent? Like, did you have to be skilled at pre-qualifying? No. Like, anybody could be…they could be, like, unreasonable, not only be motivated by price, and the marketplace would still reward them. How skilled did you have to be on pricing property? Like, not at all.
Again, sellers could be unreasonable, they could be obstinate, they could be not tethered to reality, and the marketplace would reward them and say, “Yeah, sure, here’s what you wanted, even though it’s completely unreasonable.” And then how skilled have we had to be at, you know, helping people to self-discover that their expectations in the marketplace were not gonna be met? Not at all, right? And that’s a euphemistic way of saying helping people to kind of adjust their price.
Matt: I mean, you’re saying that the simple act of having a conversation with a seller about where the price should be for their new listing, that’s a skill in itself?
Aaron: A hundred percent. And what I’m aware of is, over the last two years, it was not required. So what can happen is, is that we confuse luck with skill. That happens quite frequently to people. And I believe that that happened for agents. So, you know, you don’t have to be particularly skilled, you’re pricing it whatever the seller wants you to, or you’re like, “Yeah, I think we could get this.” And then the marketplace rewards you and you think you’re a genius. That had nothing to do with you. They confuse market conditions with as though it had something to do with you when it’s not actually factually correct.
So how to help people to self-discover. That is 1,000% a skill. Because the training, the majority of training around price is like, “Hey, I study homes and prices every day, therefore, I assume you’ll list with me at a price that’ll cause you to sell.” It should be this. Okay, well, when I say, “Tell Matt it should be this,” you know what Matt’s gonna do automatically? He’s gonna resist me because I told him.
Matt: I’m jumping in because this is really important, I wanna make sure we’re on the same page. So Aaron is about to walk us through how he’s doing the pricing conversation right now. After the last two years, you’re gonna have sellers who don’t understand the reality that times are changing. And if you go in telling them that their home is worth $50,000 less than they think it is, you’re gonna have trouble on your hands.
The idea here is that you want the seller to self-discover the right price for their new listing, instead of you telling them what it should be. So listen closely, I’m going to rewind a bit here, and then you’re going to start hearing those essential phrases in just a moment. In fact–sneak peek–the first one is the phrase “fair market value.” So let’s get back to the conversation.
Aaron: Okay. Well, when I say, “Tell Matt it should be this,” you know what Matt’s gonna do automatically? He’s gonna resist me because I told him. Versus if I said, “Hey, Matt, I’m curious, you’ve seen what’s on the market right now and not selling, and you’ve seen what’s sold and closed most recently, particularly that one that was three doors down that sold for $550,000 just a month ago. So if you were a buyer, not a seller, because I know those hats are different, and if you were going to buy this place all over again, knowing that that one sold for $550,000, and we agreed, we saw pictures, terms, and conditions pretty similar to your home. They have the pool, the redone kitchen, the baths. I mean, honestly, as a buyer, where would you feel comfortable making an offer that you believe would be reflective of fair market value?” That’s entirely different. Because when Matt tells me… Guess what? Matt’s never going to argue with his own information ever.
And then that goes in a particular sequence. You’re either gonna tell me something that’s reasonable. “Yeah, like probably around $550,000.” “I agree with you.” Notice, you told me, and I agreed with you. “Yeah, I agree with you, somewhere around $550,000 seems to be reasonable.” So here’s where it comes down to strategy. “So what I’d like to do is to go over the strategies that you have at your disposal, Matt, because I want you to feel comfortable with the strategy that we ultimately end up choosing. And whatever you decide to do, I’m going to support you 100%. Fair enough?” Versus what most agents do is they own the price, “I think, I believe we need to be here.” Now, you’re tied to it. And then the moment that it doesn’t sell at that price, you’re gonna hear from Matt, “Hey Aaron, you told me that this is what we needed to be at.” You see?
Matt: If helping a seller self-discover the pricing is a skill that an agent can and should be able to develop and flex and use when they’re working with listings, what is the beginning of that skill? Is it like immersing yourself in the market, in the comps, in what’s going on in specific neighborhoods on specific streets?
Aaron: That’s a good question. So, I think that it’s two-fold. So one is understanding, as I was mentioning previously, like, macroeconomics because that affects the real estate market. And then you can understand, kind of, where we’re at in the marketplace at this moment, meaning inventory’s gone up by a factor of three, or inventory has gone up by a factor of two, sales have come down, 50% of all the properties on the market in the last 30 days have lowered their price, right? Like, stuff like that.
So, you know, I don’t have a crystal ball. At the same time, all of that information is pointing in a particular direction. So that way, I can see like, “Okay, you know, you tell me.” And then I can ask you, like, “I don’t know about you, Matt, but, you know, I don’t have a crystal ball, at the same time, you tell me. When we see interest rates go up faster in the last 7 months than they have in the last 30 years. When we have record high inflation at 9.1%, which hasn’t happened for 41 years.
We see the stock market retreating, right, 4,000 points, 5,000 points since the beginning of this year, and we have what’s happening in the world geopolitically, does that seem like an environment in which the marketplace is expanding and prices are continuing to go up exponentially? Or does it seem like an environment in which we’re beginning to pump the brakes economically and we’re in for some downward pressure?” And then quiet, and Matt’s probably gonna be like, “Well, yeah, like, I see where you’re coming from. Like, it probably means we’re slowing down a bit.” But do you see how I’m involving you in that process? But I have to have that knowledge of macro and micro in order to have that conversation.
Matt: Right. Yeah, exactly. So start with what those big picture, those items are and how they are influencing all markets, not just your own market, how they’re influencing buyer behavior, and that’s going to impact what you need to do as a seller?
Aaron: That’s exactly right. And knowing those things. So the other thing that just popped up to me as we’re having this conversation, too, is like, “Yeah, like, I don’t know if you’re aware, Matt, do you know the actual technical definition of a recession?” You know, like most people don’t. “No, I didn’t know.” “Well, it’s two-quarters of negative GDP, meaning that the gross domestic product has actually shrunk. And I don’t know if you know this, but the first two quarters of 2022, gross domestic product shrunk. At the same time, I mean, you tell me, Matt, have you noticed at the grocery store and the gas pump that things cost more money?” It’s like, “Yeah.” “And I’m curious, when that starts to happen, do you think consumers, people who are buying things like cars and homes and clothes and things of that nature, do you think they’re out there spending money willy nilly, or do they start to conserve? They start to conserve, and that’s called consumer sentiment. So would you say that consumer sentiment is the same as it was seven months ago or do you think it’s starting to change?” Right?
So I’m helping you to self-discover, it’s like I’m educating you by asking you questions. So, I’m pulling you into the process, so you’re part of this process. And then once I have that macro data, I can see kind of what’s happening in micro in terms of what’s happening in the marketplace, then it’s understanding the process, like, procedurally how to walk somebody through that conversation. Because that is…it’s very scripted, right? Where when I present to people with regards to price, it’s going to be the same, but it’s based on the context of market conditions, as I mentioned to you, like, what we do doesn’t change, how much of it we do and how we do it changes. So as a marketplace begins to change, I’ll begin to augment that pricing conversation.
Matt: And I wanna make sure listeners understand an important point that you’re making here, and we’ll just like spell it out. You are purposely having this conversation and putting things in the form of questions so that they can feel that they are the ones, what, making the decision?
Aaron: Yeah. Because the truth is, is that it is your decision, Matt, I’m just here to help you facilitate it. Like, I’m here to help you to avoid making a poor decision. And I think what agents do, because our industry is pretty wild like that, where we’re like exceptionally egocentric, and like, “Look at me, look at me, look at me, look at me,” and lead with ego, try to lead with authority, like, “I know, and I’m the best and I know.” That’s not conducive for self-discovery, that’s conducive for combativeness, right, where you get into arguments with people. Where, instead, like where I asked you like, “Okay, if you knew that the last one sold for $550,000, I mean, honestly, where do you think you’d feel comfortable making an offer that you believe would be reflective of fair market value if you were a buyer?” Now, because I say fair market value, that triggers in your brain like, “Oh, I have to be fair,” and we have a concept of fairness in this country.
Matt: So, here, we’re diving into that first essential phrase, “fair market value”. And in just a moment, listen for the second phrase, “the marketplace is showing us.”
Aaron: So, when I say to you, “Where do you think you would feel comfortable making an offer that you believe would be reflective of fair market value?” I’m triggering in your brain, like, “Oh, I gotta be fair here.” You’re either gonna say something reasonable, unreasonable, or you’re going to hem and haw, it’s one of the three. So reasonable, you’re like, “Yeah, I’d probably make an offer somewhere around $550,000.” “I agree with you.” So, now the question is, I’m in agreement with you that the marketplace is showing us somewhere around $550,000 seems to be reasonable. Look how different that is than the way most people do that. Most people are like, “I believe, I think. I think we could get this.” Right?
Aaron: Instead, what I’m saying, “Yeah, I’m in agreement with you, Matt, the market is showing us somewhere around $550,000 seems to be reasonable. Now the question is just simply, how do we get there? So there’s two approaches. And I’d like to go over them with you because I want you to feel comfortable with the one we end up choosing. One approach is where we see what’s reasonable, that 550 number, and we start higher than that. The logic behind that strategy is I can always come,” and they finish the sentence. They say, “Down, right, I can never go back up. And I want to leave a little bit of room to negotiate.” They fill in the sentences, right? Now, why am I walking them through this process? Because they’re thinking it, right? That’s exactly what they’re thinking.
And I’m like, “Yeah, and that’s not bad.” I’m not gonna make that bad to them. “Like, it’s not bad, per se, there are a few considerations. So one consideration is that strategy takes longer, usually. Now, I know that’s not a big deal for you, this isn’t a fire sale, you don’t have to sell in a week or two. At the same time, though, I am aware of where we find ourselves in the economic environment right now, with interest rates and inflation and things of that nature, what’s happening geopolitically. And there is a distinct possibility that if we make the decision of starting high and coming down, we could put ourselves in a situation where we chase the market down. And you don’t wanna do that, do you?”
Matt: You can’t see this, but as Aaron is saying, “Starting high and coming down,” and as he says, “Chase the market down,” his hand is extended, and he’s lowering it from the top of his head, down to his chest, there’s a visual piece to this part of the script.
Aaron: Now, when I went like this, I said, “Chase the market down,” what did your brain do signaling-wise? Your brain was like, “Lower the what?” Price. But this is how you teach adults, I just went like this to you, you thought it, I didn’t have to say it. I’m like, “We could chase the market down, and we don’t wanna do that, do we?” “No.” “So, that’s a consideration, something to think about.”
Now, the second strategy that I see sellers deploy that they get very good outcomes with it, is as marketplace begins to shift and change, I’m finding that when sellers decide to position a property either at what sold recently, or actually a little bit below, they’re still getting multiple people interested. So still sometimes more than one offer on the table. What comes to the surface is the most amount that somebody’s willing to pay, we extract the capita, and we don’t have to worry about that uncertainty or volatility moving forward in terms of economics, right?
“So either one of those are okay. My question to you, Matt, is, based on what you’re looking to accomplish and why, based on the timeframe you’d like to make this happen in, in light of where we find ourselves in the economic cycle at the moment, with two-quarters of negative GDP, interest rates rising faster in the last 7 months than they have in the last 30 years, and 9.1% inflation, which is a 41-year high, which one of those strategies do you think would serve you and your family best?” And now you’re gonna tell me, but that’s entirely different. That self-discovery approach is entirely different.
Matt: You mentioned a couple phrases in there. You used the phrase “fair market value” to make them understand we’ve got to be fair about this price. And then you had the phrase “the market is telling us.” Are there other phrases, words or whatever that you intentionally used as part of helping the seller understand, you know, where the price should land?
Aaron: Yep. Great job on picking up on those two things. So there’s two more that I would use. One is that “through no fault of your own or mine.”
Matt: Through no fault…
Aaron: Everybody should write.
Matt: Through no fault of your own or mine. Okay, give me a scenario.
Aaron: “So, what I’m aware of, Matt, is that through no fault of your own or mine, marketplace dynamics have begun to change. So what I’d like to do is I’d like to go over with you some of the changes that we’ve seen in the marketplace in hopes that doing so can equip you with the information that you need so you can make the decision that’s best for you and your family. Whatever you decide, I’m going to support you 100%, okay?”
Matt: Okay, so “through no fault of your own or mine”, what is that doing?
Aaron: Yeah. So what that’s doing there, when I say through no fault of your own or mine, it’s moving me out of the equation. Oftentimes what happens is, is that people want to blame the agent for the price. And oftentimes, they may go to the selection process of an agent based on who tells them they can get the most money.
Matt: Oh, yeah, all the time. Right?
Aaron: Right? So through no fault of your own or mine, market…and they need to look like, they can’t take any of the blame, right? It’s like, “Look, it’s not your fault, it’s not mine either. So through no fault of your own or mine, market dynamics have begun to shift and change. So what I’d like to do is to go over some of those changes with you in hopes that doing so can help you to, you know, get the clearest picture as to where we’re at.” And then here’s the second phrase, “Because price is a snapshot in time.”
Matt: Price is a snapshot in time. Okay, so that sounds to me like you’re telling the seller that, I guess, the way things were six months ago is not necessarily the way things are now.
Aaron: Yeah. So it’s not uncommon now that somebody will be like, “Well, you know, Matt, my neighbor, they got, you know, $550,000 three months ago. I think I should be able to get $580,000 or four months ago, or in March.” It’s like, “Okay. And I certainly see why you could feel that way. And, you know, again, what I’m aware of is through no fault of your own or mine, market dynamics have begun to shift and change since then. So what I’d like to do is to go over with you some of the changes that we’ve seen in the marketplace, in hopes that doing so can help you to get clarity around why, perhaps, your neighbor had a certain experience and why your experience might be a little bit different than that. You know, because price is a snapshot in time. So would it be okay if I go over some of those changes?”
They’re like, “Yeah.” “So I don’t know if you know, but interest rates at January of this year, do you know what they were?” And they’re like, “No.” “They were at 3%. Sometimes a little bit less than that, 2.9%. Do you know what they are today?” “Nope.” “They’re at like five and change, five and a quarter, somewhere around there. So do you know what that means?” “I don’t know. I don’t know what that means.” “Well, somebody who was approved for $500,000 back in January, do you know what they’re approved for today?” And they’re like, “No.” “Around $400,000. So what do you think that does to the pool of prospective buyers?” “It shrinks them.”
“That’s exactly right. And when the pool of prospective buyers shrinks, what do you think happens to the inventory, what you’re selling?” “Well, it goes up.” “Yeah. And in fact, I don’t know if you know this, but we went from 0.8 months supply of inventory to a 2.4 months supply. So it’s gone up by a factor of three. And usually when demand goes down and supply increases, what happens to prices, Matt?” “They come down.” “Yeah. So it sounds like just by you saying that, you’re beginning to realize why your neighbor had an experience that may be a little bit different than yours. Does that make sense?”
Matt: Are there any other common phrases that you use in your scripts when you’re talking with sellers, you know, “the fair market value”, “the market is telling us”, “price is a snapshot”. Is there anything else that you use regularly that works?
Aaron: So my job is to help you, it’s never to talk you into doing anything. And then whatever you decide to do, I’m going to support you 100%.
Matt: Both of those to me sound like you are emphasizing that I, ultimately, make the decision.
Aaron: Yeah. Because ultimately, that is what’s really true, is that it is your decision to make, and I’m honoring the fact that it is your decision. Unlike, like, most agents, what they’re trying to do is they think it’s their decision. It’s not. And then it becomes a battle between the two of you. No, no, no. What this should be is consultative. This should be, instead of me sitting across the table from you wagging my finger and being like, “Matt, you should price your home at this price, and if you don’t, you’re dumb.” Right?
And that’s what people’s kind of approach is. What it should be is I pull up next to you and say, “Hey, Matt, here’s what’s true, man. I’ve had the great fortune over the last 17 years, I’ve helped 2,000 families accomplish what you were looking to accomplish. So I’ve done this a bunch of times, I view my view here as just being consultative. So what we’re going to do is we’re going to look at some information together as a team, I’m gonna ask you some questions. We’re going to see this realistic range emerge with regards to price. It’ll come down to strategy, we’ll go over the strategies that you have at your disposal. I can answer any questions you may have. And then ultimately, you’ll make the decision that you feel is best. And whatever you decide, Matt, I’m gonna support you 100%.”
Now which one of those two approaches is more palatable to you? So I read a book called “On Being Mortal,” great book, different topic. Anybody who has parents that are, you know, getting older, they should read that book. But anyway, one of the main takeaways in that book is he’s a physician, and he talks about modes of communication. And physicians, notoriously, like, we have sayings where they don’t have a good bedside manner, right? And it’s because they’re not really trained in that, they’re trained to solve problems, right? And what was very interesting is he went through the stages of communication.
So in medicine, it used to be patriarchal, which is “I know and you don’t.” Like, “I tell you only what you need to know, do this, and that’s it.” And people would be like, “Okay.” And that was like in the ’50s. Right? But then what happened is, you know, with litigation and more information that’s available, then physicians were like, “Okay, here’s all the information, you decide.” And we don’t like that either. What we want is a mix.
We want like, “Hey, here’s the information. Here’s the options that you have at your disposal. If you want my opinion, I will share it with you in terms of which option would serve you best based on my professional experience. Ultimately, it’s your decision. And whatever you decide, I’ll support you 100%.” That’s really what they’re after. And when I read that, I was like, “Oh, that’s totally true.” And it’s totally true here too. So we went from being patriarchal, which was like, “Hey, here’s the deal. Nobody has access to any information. There’s no internet. If you wanna know anything about real estate, you have to come to me. Like, I am the gatekeeper of all information, and I only tell you what you need to know, and that’s it.” “Okay.”
But then we went to the internet. And now people are bombarded by Zillow and Redfin and all this information. But as information becomes free, specialized knowledge becomes more valuable. So now the same evolution’s happened for us, what they want is they want information, options, and professional guidance. But they also want to feel like they’re in control of their decision. So that’s the whole premise behind these phrases that we use, behind the kind of approach around the pricing conversation. So again, my job is to help them to make a decision, it’s not to talk them into doing anything, but my job is also to help them to avoid making a poor decision. And a poor decision at this moment would be trying to reach for what was possible in January or March when that’s not the environment that we’re in, and they will sit on the market for months, they will get mad at you, they will ask you, “What are you doing to market the home? And how come you’re not putting in “The Wall Street Journal?” And like, “Can we do anything else?” And like, you know, bother your staff and all that other stuff, make your life more difficult and not enjoyable. When the real truth is, is that we as agents failed them to help them to make a decision that wasn’t poor.
(SHORT MUSIC TRANSITION)
Matt: So there you go, six essential phrases you can use to talk about price with your sellers. Even if you’re not a big scripts person, I hope you got a lot out of this episode. Those phrases are things you can use with any seller, whether it’s part of a full script or not. Great stuff, Aaron Novello. Thank you, thank you so much.
Hey, reminder, we’re not done. I’m gonna go through the takeaways from this episode and all that stuff. And then at the very, very end of the show, we have that bonus eight or nine minutes segment all about the price reduction conversation. So stay tuned for that. If you want to connect with Aaron, take a look at today’s show notes. We’re gonna link to his agent website, and to his coaching website there. His coaching business is called Elite Real Estate Coaching. And you can learn more about that by following the link in today’s show notes. I will also link to Aaron’s first appearance on The Walkthrough™ back in Season 1. If you missed those episodes, I highly recommend giving them a listen.
How about some takeaways from Episode 95 with Aaron Novello? Six essential phrases to guide your sellers to success during the pricing conversation. Ready? Here we go.
Takeaway number one is this quote from Aaron early in the episode, he said, “As the marketplace begins to change, I’ll begin to augment the pricing conversation.” What he’s saying is you have to adjust how you approach talking about price when the market is changing like it is now. The macro and microeconomic factors that impact buyer behavior will also impact sellers and the value of their home.
Takeaway number two: The pricing conversation is a skill you can learn. The script involves educating the seller by asking questions, don’t tell them what the price should be. Instead, pull them into the process of seeing the reality of the market, ask them questions, and let them decide what the price should be.
Takeaway number three, as Aaron went through his script for the pricing conversation, we broke down six of the essential phrases he uses. Let’s review those.
Phrase number one: fair market value. He says to the seller, “What would be reflective of fair market value if you were a buyer?” The idea here is that you want to create an obligation to be fair in pricing the home.
Phrase number two: the marketplace is showing us. You’re telling the seller that they can’t ignore what the market is doing.
Phrase number three: through no fault of yours or mine. The idea here is to remove yourself from the equation because sellers like to blame the agent when the home doesn’t sell.
Phrase number four: price is a snapshot in time, what your neighbor got for her house three or four months ago has no relevance today.
Phrases five and six are my job is to help you, it’s never to talk you into doing anything, and whatever you decide to do, I’ll support you 100%. Aaron says both of these honor the fact that it’s the seller’s decision. Your job is to help them avoid making a poor decision. That’s a quick summary of the six essential phrases and those are my takeaways this week.
That bonus segment about price reduction conversations, that is still coming up at the very end of the show. For now, do you have any questions or feedback about anything you heard today? If you do, there’s a couple different ways you can get in touch, leave a voicemail or send me a text. The number to use is 415-322-3328. You can send an email to walkthrough[at]homelight.com, or find me in our Facebook Mastermind Group, go to Facebook, do a search for HomeLight Walkthrough™, and the group should come right up.
That’s all for this week. Thanks to Aaron Novella for joining me and thank you for listening. My name is Matt McGee, and you’ve been listening to The Walkthrough™. At HomeLight, we believe in real estate agents. We’re here to explore how great agents grow their business, stand out from the crowd, and become irreplaceable. Go out and sell some homes. I’ll talk to you again next week. Bye-bye.
(SHORT MUSIC TRANSITION)
Matt: Welcome back, and welcome to something new. You just heard Aaron and I talking about the initial price conversation with sellers and the six essential phrases to help them self-discover what the price should be. Well, when Aaron and I recorded a couple weeks ago, we also spoke about another important conversation, how to convince your seller that it’s time for a price reduction. Some of those same essential phrases come into play in that situation. Now, I didn’t want to drop that out of the episode altogether. So consider this like a bonus segment after the main episode. This is going to run about eight or nine minutes, and then I’ll come back with a question for you and final goodbyes. All right? Here we go. More with Aaron Novello, this time about the price reduction conversation.
Matt: Let’s talk about the situation where, okay, so you’ve got the listing, it’s on the market, it hasn’t sold, maybe we’re a month in, maybe we’re six weeks in, it is time to go back to your seller and say, “We need to lower the price.” What is the best way to present that to your seller?
Aaron: The first thing is we have to rewind because that conversation actually starts at the listing appointment. And again, we haven’t had to do that before. But once we come to an agreement in terms of where we’re going to get started off at price-wise, I’m going to say to you something like, “You know, Matt, based on this information that’s available to us at this moment, because as I mentioned to you, price is a snapshot in time, this seems to make a lot of sense. And if the marketplace sees value in the price that we’ve decided to put on the product and the property, they’re going to tell us that they see value. How do you think they’re going to tell us that?” And they’d be like, “Well, we’re gonna go out to showings and we’re gonna get offers.” “Yeah, 100%.” And a lot of showings, three, four showings a week, five showings, then we start to see offers come in.
If for some reason the buyers don’t see enough value, they’re going to tell us that as well. How do you think they’ll tell us that? “Well, we won’t get any offers.” “That’s right, we’ll get showings and no offers or we’ll get very few showings if any at all.” I do not believe we will be in that last category. At the same time, if we get showings and no offers, that’s the buying public telling us they see enough value to look and just not enough to buy. And if that happens, we can always make a small, appropriate adjustment. Do you like that? Appropriate adjustment. And they’re like, “Okay.” And then I’m like, “Does that approach makes sense to you?” “Yeah, it makes sense.”
So I’ve already engaged the conversation at the listing appointment. Then when it goes on the market, the day it goes on the market, “Hey, Matt, it’s Aaron here, your real estate agent, just want to shoot you a quick message and let you know that all the marketing is in place. You know, property is active on the market, pictures came out great. Like we discussed, we’re going to know together as a team if the marketplace sees value in our pricing product. If so, we’re gonna get a lot of showings, we’ll get offers on the table. For some reason they don’t see no value, we’ll get showings, no offers, a very few showings if any at all. Again, I don’t believe we’ll be in that last category. And as promised, I’ll be giving you updates every 7 to 10 days letting you know what’s going on, and then the adjustments we need to make until we get an offer that’s acceptable. Do you have any questions for me?” “No.” “Okay, great. Again, appreciate your business and make it a great day.” Done.
Seven days on the market. “Hey, we’ve been on the marketplace for seven days, Matt, just wanna give you a quick update. We’ve had three showings which is great. What that means is what we’re doing is working.” That’s neuro-linguistic programming. “What that means is that what we’re doing is working, we’re driving traffic into the property. Right? We’re networking on your behalf, which is great. Like we discussed, we’re going to know as a team if the marketplace sees value. If they do, great. If not, you know, we can always put our heads together and adjust the approach. I’m pleased with the showing activity so far. And, you know, hopefully, my next phone call to you will be with an offer on the table.” So look, we’ve already had this conversation three times.
Matt: And you’re only a week in.
Aaron: And only a week in. Then 14 days, we’re having it again. “We’ve had five more showings, we’ve had eight showings, no offers. And again, you know, like we discussed…” Again, same conversation. Then at the three-week mark, if we still have showings and no offers, that’s when we ask for a reduction. But think about that. I’ve already mentioned it to you five times. You know it’s coming.
Matt: Yeah, I like that you’re starting to have…just put it out there as if it happens during… you know, you’re putting it out there at the beginning, before the listing even goes live. “If it happens, you know, this may be coming down the road.”
Aaron: That’s exactly right. And we’re managing that expectation. So then by the time I get there, by the third week, they know what’s coming. And then the way that conversation is, is like, “Hey, Matt, this is week three, I just wanna give you a quick update, let you know what’s going on. It’s been three weeks since you’ve been on the market, 21 days. And the good news is, is that in that timeframe, we’ve had 10 showings, which is wonderful. Again, what that means is that what we’re doing is working, we’re driving traffic into the home, you know, the networking we’re doing with top agents, and all the marketing that we’re doing on your behalf, you know, it’s working. At the same time, having that number of showings in a marketplace that’s beginning to change and no offers, it’s actually beginning to concern me. May I share with you why?” “Well, yeah.”
“Well, the marketplace is showing us that they see enough value to look, they’re just not seeing enough value to buy. Now, when we originally connected, you shared with me that the main reason that you wanted to sell the home is you were looking to move to Texas, and you wanted to be closer to your family and you wanted to make that happen by September. Is that still the case or has that changed? “Nope. Still the case. Definitely wanna do it.” “Okay. And then my job is to help you, it’s never to talk you into doing anything. Is there an option for you to not sell and still move?” “No.” “Is it an option for you to rent the property and still move?” “No.”
“Okay, so it sounds like you’ve decided that what’s in your best interest in order for you to get what you want, at the time you want, is to actually get the property sold. So with that being the case, we have three options that are at our disposal, really, two. And I’d like to go over them with you so that way you can decide what you want to do, and whatever you decide, I’ll support you. So the first option is that we leave the price the same. And the reason we would do that is basically just hope and wish and pray that after 10 showings, somebody would show up and maybe make us an offer, you know, that’s close to what we’re asking. You know, at the same time, and my intention saying this is not to be negative, it’s just an accurate assessment of reality, having been on the market this length of time with that many showings in a marketplace where inventory is going up and demand is softening, the probability of that happening is pretty small. We’re probably going to get more of the same. And that’s not being negative, just an accurate assessment of things.
The second option, this is what most sellers decide to do, provided that they still have the means and the motivation to get the job done and to get the property sold is we could just simply make an adjustment in the price. And in doing so, that’s going to dramatically increase the probability that we’ll get even more activity and an offer on the table. Because I’d much rather bring you an offer that you can say no to, Matt, or I can negotiate on your behalf and pull them up to where we want them to be, versus being in a situation where we’re not getting any. So based on what you’re looking to accomplish and why, based on the timeframe you’d like to make it happen in, in light of everything that’s going on economically, what do you think we should do?” Now when I say that to you, you’re either going to agree, and then it’s just a question of how much, or you’re going to say, “Can we wait?” Or, “Can we do more marketing?” Or, “Can we do this?” And then I just have to handle that. Right? But that’s the structure of that conversation. But you set it up at the listing appointment and at all of the kind of touches while you service the listing.
Matt: And because you’ve set it up all along with each call all the way from the…that conversation has to be much easier at that point.
Aaron: Oh, tremendously easier. Because we’ve talked about it five times already. This is like the sixth time we’re talking about it. So it’s expected, they’re just like, “Okay, yep, yeah, I think we should reduce the price.” And then they might say like, “Yeah, I’ll come down like $5,000.” “Okay. I mean, that’s an option. You know, at the same time, do I have permission to be candid and straightforward?” They’re like, “Yeah.” It’s like, “Well, if we were only missing by $5,000 bucks, we probably wouldn’t be having this conversation, we’d probably have an offer on the table. So I’d much rather see you make an adjustment that the marketplace is showing us is required versus kind of a stair-step approach because that can end up creating a dynamic for you where you chase the market down.
So what I’d like to do is to share with you some market data, right, because while we’ve been on the market, some things have transpired over the last three weeks. So a new property came on the market in the neighborhood. And it’s 3 bedroom, 2 bath, it’s 2,800 square feet, just like yours, has a pool. Do you know how much they’re asking?” They’re like, “No.” It’s like, “Yeah, they’re asking $525,000.” “Wow, really?” “Yep. And it’s nice. You know, I can send you pictures of it on the inside. It’s not a dump. And then I’m also aware that there was one that actually lowered their price. So that one, remember the one that was 560?” They’re like, “Yep.” It’s like, “They came down to $540,000.” “Wow, did they really?”
“Yeah. So what do you think the marketplace is telling them about their price and product?” “Well, it’s telling them that they’re too high.” “Exactly. What do you think the marketplace is telling us after having 10 showings and no offers?” “Well, we’re probably a little too high.” “Yeah. So, I mean, I know you shared with me that you wanna be to Texas by September. So that means we have to be under contract in the next 30 to 45 days because it takes 30 to 45 days to close. Now, what would happen on the outside chance, Matt, that September came and this home wasn’t sold, what would that mean for you and your family?” “Oh, that wouldn’t be good. I’d have to move, my wife would have to stay here.” “Okay. And I’m imagining that that’s not optimal, is it?” “No.”
“Okay. So we have a choice to make and the choice is yours. We can either, A, make a small adjustment that your neighbors have already tested for us and didn’t work for them, and have to revisit this conversation and jeopardize your timeframe in which you’d like to make this move. Or we can make an adjustment that the marketplace is showing us is required, and have the next person who’s going to come into the neighborhood and buy a home, make sure that they look at yours and make an offer on yours versus the competition. So based on what’s important to you and what you value most, what do you think we should do?”
Matt: So there you go, first time we’ve ever done a bonus segment like this. And my question to you is this, what do you think of this format? I mean, this episode is definitely a bit longer than we normally go, right? But I don’t know, I thought the content was so good, I did not want to edit it all out. So let me know what you think. Send an email. Again, it’s walkthrough[at]homelight.com or call or send a text, 415-322-3328. I would love to hear from you. Let me know what you thought about this bonus segment. Right now, the real and the final goodbye. Thanks again for listening. I’ll talk to you again next week with another Walkthrough™.
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