Blog / Vendor Management
Mastering the Art of Price Adjustment, Phil Harris
Price adjustment is like a fiery dragon that can make even the toughest real estate agent tremble. Phil Harris, Managing Director of Harris Real Estate in South Australia, isn’t scared of dragons and believes that handling price management is all about positioning and building a platform from which to negotiate. He says, “Price adjustment is about human nature and is all about relationships.”
Don't be afraid
Phil recently built a price adjustment system for the whole of his business. He believes that the task of a listing presentation is to set a realistic price and to start a relationship with the vendor, so that in time the vendor will come to trust your opinion and recommendations. Many agents listen to what the owner wants and, for fear of losing the listing, stay silent. Phil says, “Generally a vendor will want five to ten per cent more than what the marketplace is prepared to pay. Understand that before you get to the table. Don’t be confronted by it.”
He thinks it is vital that agents speak up and quietly temper vendors’ expectations. However, it’s is not a matter of saying, “You want a million dollars? Forget it. It’s only worth $900K.” Rather, because you are in the game of positioning the buyer, Phil advises, “Say, ‘Hey, if you want a million dollars, let’s have a go at that, but let’s do it in a correct fashion, and if we haven’t had a response from the marketplace in the next seven days to a fortnight, let’s come back and readdress it’.”
Position the property in the market
At the listing presentation, Phil says position the property in the current market as this again, scales down vendors’ expectations. For the vendor who wants a million dollars, he suggests countering with your intimate knowledge of the local market.
Phil advises, “Say, ‘Look, you know, number 22 on the street sold for $937,000; that had a tennis court, yours doesn’t. The one around the corner had, you know, XYZ. So, whilst I would love to get you a million dollars – and by the way, that would be a record sale price for a property of this type – the comparable sales are suggesting more around a nine. However, let’s have a chat about how we can have a go at getting a million dollars for you, but still making sure we maintain the integrity and don’t damage the property’.”
Don't promise a price promise the process
Phil says that he can’t make a big promise around the price, but he can make a big promise around the process. Again, it’s all about how you deliver the message. Phil says, “What you can say is, ‘I understand that you want that million dollars. I can’t guarantee that for you, but I do want to make some big promises for you today, in that here’s my process, and here’s my strategy, and I know that if we follow this, this will give you the best chance of achieving that figure that we’ve just spoken about’.”
Build credits in the emotional bank account
Phil believes that building credits is the most important part of the price adjustment system. Phil says, “You have to get vendors on side with you right from the get-go, because at the moment they’ve listed with you, they think you are the best agent in the world.” They are expecting you to deliver and what matters now is that every interaction your vendors have with your company meets a high standard.
“Building credits are the opportunities that come when the clients get the marketing proof, the way in which your photographers conduct themselves when they’re actually at the property, the way that your team rock up and meet the client.”
Every interaction matters because they are opportunities to build emotional credit with the client. As Phil says, “Price adjustments are totally about relationships. If they trust you, then they’ll take your advice. I look at every aspect of my business. As soon as I have listed a property, my Buyer Specialist will make an appointment to go and see the client, and they take them a small gift, like a nice scented candle to use at an open home, and they sit down, and they have a chat to the owner about their property, about why they bought it, who they think the next buyer is. So, all of a sudden, we’re just putting credit in the bank because it’s all about that relationship.”
Create expectations and build platform for negotiation
Once the client has signed and the dust has settled, Phil then prepares for the Set to Sell meeting. This is another crucial turning point in building a relationship with the vendor. What is said in this meeting creates realistic vendor expectations and sets the stage for a discussion to occur in the future, if necessary, about price adjustment.
You have to get vendors on side with you right from the get-go.
Phil prepares a detailed document that he emails or takes with him as part of his pricing adjustment strategy. He explains, “The document shows that we are ready to go live. We’ve got the marketing and the signboards and a structured go-forward plan of what will happen over the next 28-30 days. We list the numbers the client should expect to see coming through the home, and the number of offers that we would expect to have at week one and week two and so on. If we don’t hit those numbers, we can then go back and have a chat about the price.”
By laying out the rules of engagement at the start of the process, you build a platform for yourself to have a discussion about price management in the future.
Communicate daily
As Phil is an auction-orientated agent, his campaigns are intense. He says, “I need supercharged relationships for me to get properties priced correctly and positioned correctly before auction day. So I’m on the phone or sending a quick text message first thing most mornings. I endeavour to get there every day. I don’t quite get there all the time, but that’s certainly the intention.” These interactions build emotional credit.
Have weekly face-to-face meetings
Again to build relationships with clients, Phil organises weekly face-to-face meetings with vendors in his office. At these meetings he says he goes through, “…the marketplace report of all of the activity that’s occurred in the last seven days, buyers’ general comments and then specific price feedback, and competing properties and recent sales. We want to look at every surrounding property that has sold within the last seven days and talk about that and then revise current marketing strategy. I’ll talk to the owner and say, ‘Right, okay, we’re now 14 days into the campaign, how do you think things are travelling? Is there any part of the strategy you feel that we could move around right now?’.”
These meetings also discuss any aspects of presentation that may need to be changed to overcome buyer objections. Phil says, “I don’t want to be getting to week five of the campaign and the vendor says, ‘“Oh look, I think that if we put some new laminate on the kitchen bench tops then maybe that then we’ll get our $1.1m’.”
These kinds of meetings provide an excellent backdrop for any discussion about price reduction because the facts of the forthcoming sale have been laid out in black and white.
Send out regular detailed personal emails
Phil believes that one of the qualities agents need when dealing with price management is emotional intelligence. As part of the process of building that relationship with the vendor and creating an atmosphere of trust, he advises engaging with the vendor through the sales process. Phil says, “Share that journey with them. Send them regular and very specific emails that detail prospective buyers and their feedback. What you find is when you are sending those sorts of emails and having that level of communication, your relationship with your vendor is stronger because they’re calling you to talk specifically about a specific buyer, not just a random buyer. And if a buyer purchases elsewhere, that is about making the client realise that one door has closed. When the moment arrives to say, ‘It’s time to accept’, or ‘It’s time to modify price’, that trust is there, and it occurs. As you go through the process and you close the doors on these people, then they are more educated to do the right thing when the right offer comes along.”
If price management is facing the dragon, letting vendors know when doors are shut is also a key part of the process.
Around auction communication
Phil has a number of emails that he sends a day before an auction, depending on the level of interest, outlining courses of action in the event of there being no bids or bids below expectations. He says, “They are very detailed and outline what we have done with the property. For example, if the price is a block, the email will say, ‘We feel as though we’ve marketed the property well. We’ve had good numbers of people through the home,; the Internet hits have been high, we’ve got good strong buyer interest, so the only thing really blocking the sale is probably going to be price. Good luck with the auction’.”
If a property fails to sell at auction, this is a key stage in the price management process. Phil sends out an ‘A Way Forward’ email on Saturday afternoon or Saturday evening that outlines the go forward plan to the vendor, which covers off on pricing and things like that. Again, this shapes clients’ expectations on price.
Give the vendor a way out
Sometimes an owner becomes emotionally stuck on price. They may want to move on price, but feel they won’t be able to live with the pain of changing price. Again, Phil says this is the time when your emotional intelligence must come to the fore to aid price adjustment.
He says, “John McGrath made a great comment about pricing with owners. He spoke about helping owners to save face. So, in a marketplace, in a tight marketplace where owners are taking a substantial hair cut on price, have some case studies in your back pocket that say ‘Hey look, don’t feel so bad about it because this one around the corner wanted this, and they sold for this’.” Enabling vendors to save face with price is a really important part of the process.
Escalating the call
If you find that a vendor will not move on price, one strategy is to get your director involved. Phil says, “I think the most powerful way is to get face to face, if you can. And sometimes the director won’t say anything that’s different; it’s just taking a different angle. A director can talk more holistically about what’s happening in the marketplace as far as interest rates and the bigger picture go. In our office, it works very effectively for some of our members when I give the vendor a call and say, ‘Hey, you’ve had so and so out to look at the home - how did he go?’.” And it’s the same question with the price adjustment. It can really help if I call and say, ‘You’re dealing with one of our agents. I’ve noticed that you’ve now been on the market for 45 days. Tell me how do you think things are going?’.”
I need supercharged relationships for me to get properties priced correctly and positioned correctly before auction day.
Real estate favours the brave. It is possible to manage conversations about price as long as you are prepared to take on the dragon.
"Phil is available to coach you monthly on the Real Estate Hot Topics audio coaching program as the current co-host of the 2013 series."
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