Seller thinks listing is worth more than it is...

[Dave Nash]

I had a short pre interview today for a possible listing. I toured her house and saw the inside and outside. I didn't tell her the comps or what I thought about a price, but I asked her what she wanted and thought the house was worth. She came in about $20 k higher than I had researched, but didn't say that. I am sitting down with both the husband and wife for a listing presentation and wanted to see what you would say if you heard the price they wanted was sky high.

[Frank Wong]

Hi Dave,

First, what is the price point?  If its $20k off $150k house that is significant if it's $20k off of a $500k house then not so much.  But this is what I do when I sit down with sellers and right before discussing price.  I educate them.  This part is the key and you need to set the tone. 

Let's talk about the price now but before we do I want to educate you on how price works.  Most sellers think that they dictate the market price but the reality is you do not control the price, I don't control the price, the buyers and the market does.  

How a buyer determine price is very simple.  They take a look at what the homes in the neighborhood have sold for in the past 3 months and then compare the sqft, bedrooms, baths, quality to your house.  Now they have an idea what the market price of your house will be and their agent will explain to them the comps.  Buyers won't pay more than what they think and what the statistics show as market price.  If you were buying a house would you do the same? (I am putting the sellers into this frame of mind as a buyer)

It's very similar to shopping for a car.  If you were looking to buy a Honda Accord you would go around all the dealerships and compare and contrast prices, you may compare a Toyota Camry with it.  After your research you find on avg the Honda Accord sells for $25k would you as a buyer buy one for $29k at the dealership? This works the same for houses. 

If we misprice the house the buyers will not submit an offer on it. What will happen is the house will sit on the market just like the $29k Honda Accord.  As it sits on the market more and more buyers will wonder if there is something wrong with the house.  This is just a natural thought from buyers.  What will end up happening is that we will have to lower the price 40 days from now and we have wasted that time. (now be quiet let them think)

Great, now we know how buyers come up with a price and they dictate it,  what price were you guys thinking of?  Let them talk and then you can now give your opinion and go through your comps.  They may or may not go for your price but at least this way you set the expectations of the sale.  If it's a great listing and they want to go with you but want that $20k.  I hate doing but sometimes take the listing and let them know if it doesn't sell in 35 days.  We lower it to the price I am suggesting.