Three Ways to Price a Home: Two of Them Are Traps | Disclosures with Nick & Dave

Episode summary

There are only three ways to price a home — list low, list at fair market, or list high — which sounds like it should make for a short episode. It doesn't, because the phrase "fair market value" is doing enormous heavy lifting, and because two of those three strategies are frequently a playbook being run on you rather than a strategy chosen with you.

We start with the uncomfortable foundation: real estate school barely teaches you how to price a home, so agents are largely left to figure it out themselves — which guarantees wide disagreement on what any given house is worth. Dave and I walk through how we actually build a broker price opinion: pulling comps from the MLS (sold counts more than pending, pending more than active), adjusting for beds and baths, discounting that neighbor's listing that's been sitting at $775K for 120 days, and then the part software can't do. Call it 80% math, 20% art — and the 20% doesn't move until someone walks the property and notices the dark rooms, the soft floor, the "remodeled by Handy Andy" finishes, the south-facing living room.

Then we pull back the veil on the two plays. Buying the listing: an agent tells you $715K when the honest number is $690K, because nobody wins the appointment by being the bearer of bad news — and you pay for that flattery six months later in price cuts and a stale listing. Phoning it in: a high-volume agent leans on "it's a tough market," weights the comps low, and sells quickly because anything sells when it's $20K under value. Both feel great in the moment. Neither is chosen on your behalf.

The honest version: all three strategies have legitimate uses. Price high if your home has something the comps genuinely don't — a river view, a green belt — and you can afford the days on market. Price low if you're a motivated seller with a contingent purchase and you need certainty over top dollar. Price at market most of the rest of the time. What separates strategy from manipulation is whether you understand the number, chose the approach clear-eyed, and agreed on Plan B before you signed.

Hosted by Nick Aufenkamp and Dave Miller of The Tartan Team, brokered by Real Broker, LLC. Serving Clark County and Southwest Washington.

In this episode

[01:00] Why real estate school doesn't teach you to price a home
[01:42] The only three strategies: list low, at market, or high
[03:15] "It's worth what someone will pay for it" — why fair market value is slippery
[06:32] Appraisal vs. broker price opinion — and why appraisals hug the contract price
[08:21] How we actually build the number: pulling and weighting comps
[11:43] Why that neighbor's 120-day-old listing barely counts
[13:37] The 80/20 split — where the data stops and judgment starts
[14:32] What doesn't show up in MLS data: busy streets, dark rooms, roofs
[18:42] Zestimates, and the ~7% accuracy claim
[20:31] Why two agents walking the same house catch different things
[22:42] Pulling back the veil on the real estate coaching playbook
[23:49] "Buying the listing" — the $690K house someone prices at $715K
[27:48] Why you should interview multiple agents and test the outliers
[29:04] The other trap: phoning it in and underpricing for a fast commission
[35:58] The trade-offs of pricing high — and who can actually afford to
[40:18] Anchoring high, and the two-to-three-week rule we set up front
[43:49] The trade-offs of pricing low — motivated sellers and bidding wars
[47:54] Pricing at fair market: the conventional wisdom, and its limits
[52:05] The real takeaway: do your own research, interview several agents
[54:24] The conversation nobody has: what's Plan B if this doesn't work?

Links from this episode

Episode 8 — Two Homebuyer Fees Worth Negotiating — the previous episode
Episode 4 — Why We Charge a Flat Fee to Buy but a Percentage to Sell — our listing tiers and the hourly consulting they mention at the end
Net proceeds calculator — see what a given list price actually nets you
How we sell — our listing service tiers
Book a free consultation

Transcript

Lightly edited for readability. Speaker attribution in the fast cold-open banter is approximate; attribution through the substantive pricing discussion is reliable.

Nick (00:00): Hey, welcome back to Disclosures with Nick and Dave. I am your host, Nick Aufenkamp, along with my trusty co-host, Dave Miller. Dave, what's going on, dude?

Dave (00:08): Not a whole lot. Just been working hard, trying to figure out how to price these houses for our clients.

Nick (00:14): Working hard or hardly working, am I right? We're sitting on the back patio in preparation for this podcast, which is usually code for not working that hard.

Dave (00:29): Speak for yourself, man. I've been thinking hard about this a lot. And thank you — you did tease the episode. How to price a home. This seems to be highly relevant to real estate, wouldn't you say?

Nick (00:38): I'd say it's on the nose for the podcast, actually. Ironically though, I think there's a lot of mystery about how homes get priced — and a tremendous amount of disagreement, too, between agents. We were talking about this as we were working hard on the back patio: that real estate school, if you can even call it that — the course that you have to take to get licensed —

Dave (01:05): "School" is a little optimistic.

Nick (01:08): It's on brand for me, okay? So real estate school doesn't teach you much about how to do a comparative market analysis, or CMA, which you've probably heard about if you've thought about selling a home before. And so a lot of agents are just kind of thrown to the wind to figure out how to price a home — which seems problematic.

Dave (01:29): I mean, at a bare minimum it's going to lead to a lot of diversity of opinion on what is this place worth.

Nick (01:38): That's politely put.

Dave (01:42): And I think if we were to break it down, there's really three pricing strategies. It's list low, list at fair market, or list high. And it seems like — well, this should be a pretty simple episode, right? If it's really only those three buckets.

Nick (02:05): Has anything ever been simple that we've talked about? We thought that the last one was going to be, and we ran close to an hour on the closing cost estimate sheet. So no, there's nothing simple in life. But it's funny, because even though there's really only these three strategies — listing at value, listing low, listing high — different agents take different approaches, some with good intent, some with ill intent. I think it's important for listeners to know one, what the playbook is that may be being run on them. And then two, to really think through: all right, what are the questions that I should be asking a listing agent? What goes into really determining the price of a home, and what are the trade-offs of each of these strategies? Are all of them equally legit, or should some be just dismissed outright?

Dave (03:15): And the thing to consider is the reason that this is such a grey topic is — I don't know, I'm reaching for the words right now.

Nick (03:32): It's blanking out of my mind, we're going to end up having to cut it.

Dave (03:38): We'll make you sound smart in post. What is the term for like a coined saying?

Nick (03:55): Like a catchphrase?

Dave (04:00): The saying that comes to mind that I was referring to is: it's worth what someone will pay for it. And so, to understand — we're saying you could list below, at, or above fair market value. Well, "fair market value" is doing the heavy lifting in that sentence, right? What is fair market value? And as previously alluded by Nick, that's something that is given very little training, in part because it's not like there's a universal "this is exactly how it has to be done." And on something as dynamic and diverse as housing, everyone's going to have a slightly different opinion on it. So your starting point is already not necessarily nailed down, in terms of what everyone agrees fair market is.

Nick (04:55): Sure. And it's also a thing that moves across time, based off of the interest rates, the buyer demand, all these different factors. So it is a dynamic thing.

Dave (05:08): That's the preface we're starting with. The main thing we want to impart in this podcast is to be able to recognize what strategy the agent you're interviewing to sell your house is employing — is it good, is it bad? But you need to go in understanding that maybe there is just a disagreement on what the actual fair market value is. That could very well be where you think your agent wants to list low, because you think your house is worth more, but they actually just think your house is worth less.

Nick (05:45): That's what we're getting into. I love that — that's a really helpful frame. What we're really looking for with pricing a home is coming to some sort of consensus on what fair market value is, because we need that number before we really determine a pricing strategy around it. And there can be disagreement over it, because unfortunately there is no formula for figuring out the exact market value on something.

Dave (06:15): I can hear appraisers clutching their pearls listening right now.

Nick (06:22): So what I'm alluding to is there actually is a uniform appraisal standard. But that is something that appraisers — funny enough — actually have to go to more, quote unquote, "schooling" than real estate agents, to steal your term. And that has to do in large part with protecting banks. They have their own association, and as we covered in previous episodes on lending guidelines, they want to make sure a house is actually worth what it sells for. So when they come in with an appraisal, they're not necessarily making an argument on what the current market value is. It's more them trying to assure the bank that the house will sell for at least that. And at least in the last ten years, with an appreciating market, appraisals usually are under what the house could actually get sold for.

Dave (07:05): Fair to say. And there's so much that can be said on the appraisal front, because there's a weirdness that the appraiser gets to look at the contract with the purchase price before they go out to the house and appraise it. And lo and behold, it's amazing how many appraisals come back right at the contract price. Who knew?

Nick (07:35): Almost like if it doesn't, this deal doesn't go through and everyone doesn't get paid. I'm not suggesting anything.

Dave (07:42): Careful, your cynicism is showing through.

Nick (07:50): But that is good to distinguish — that an appraisal is different from a broker price opinion. When somebody's coming over to give you a listing presentation, they're not giving you an official appraised value of your house. They're giving you their opinion as a real estate professional, a broker, of what they think the market value on your home is.

Dave (08:11): Now, we are brokers.

Nick (08:13): That's right. We got the licenses. We did the schooling.

Dave (08:18): Absolutely we did. So how do we make the number?

Nick (08:21): We make it up. No. Well — let's just say, to keep a running example, we're talking a house that's around seven hundred thousand dollars. Let's say it's four bed, two and a half bath. We're going to start by going in — and you know, you can get a lot of this info on Zillow, because Zillow just feeds through sort of the back-end multiple listing service data that we have access to as brokers. And we're going to start looking at comparable houses that have sold within — the further back in time from the current date, the less important it gets. But usually within twelve months. If you're in a market that hasn't had a lot of sales, sometimes we'll go further back than that. But in general, twelve months, just because of the difference in the interest rate climate.

Dave (09:20): Appreciation, and all these different sort of ambient factors that move and change. Twelve months is where most brokers draw the line.

Nick (09:34): And so we're going to look at comparable sales and sort of what they sold for, and we're going to try to go through the photos and compare the quality of the product — as well as, there's formulas to adjust for "all right, we think a bedroom is worth this much in this market." So maybe having an additional bedroom is worth an extra twenty thousand dollars on the sale price. So we'll adjust if there's not exact comps, meaning more four bed, two and a half baths. We'll adjust for that, and we'll add up all these comps, see what their average comes in at, and then we'll try to get a baseline value that we would consider — or quote unquote be — the fair market value based off of this set of comps that we pulled. Once again, twelve months or newer.

Dave (10:30): The newer comps are a lot more useful, in the sense that it's a stronger indication of price.

Nick (10:40): And it's not just closed — there's also looking at pendings, and what else is currently active on the market, that also helps inform that price opinion. But there's definitely a weighting of what carries the most value in terms of determining that fair market value. Sold comps count for more than pendings, which count for more than actives.

Dave (11:10): And this is just practically speaking on the seven hundred thousand dollar house.

Nick (11:18): Where it's roughly within fifty grand. When we first get off the phone with a seller and they're like, "This is our address" — we've probably got an idea within fifty grand either way of what the house is worth, just based upon the neighborhood. But that's not a useful hundred grand swing. So that's what we're trying to narrow in from.

Dave (11:43): But oftentimes, right, the seller will also send us a comp that they have, where it's like, "This we believe is a comparable house, and it's listed for 775." And that may be true — but it's also been listed at 775 for 120 days, which means it's not selling, which means it should carry almost no weight. Not no weight, but pretty darn close, compared to something that sold last week that was also a four bed, two and a half bath in the same neighborhood and closed at 690.

Nick (12:14): Right. Houses that are active on the market and have not moved aren't no data — but you have to be able to correctly interpret the data of, all right, is the reason that they're not moving that the house is priced high? And if there is an outlier like that, we'll oftentimes do some real specific research into: all right, has it been on the market for that whole 120 days? Has it had an offer that went under contract and then fell out of contract? Has it had no offers? Has it come off the market? Have they done a price reduction?

Dave (12:56): We're going to be looking at that. But in general, yes — if an active hasn't moved in 120 days, then it's not helpful in a one-to-one ability to extrapolate a price for our listing.

Nick (13:09): Yep. Gives us a better idea of what our competition is, but more positioning than real pricing data. So we're looking at all of this information that we're really pulling from our local MLS. Most of that data comes from there — which is one of the huge values of belonging to an MLS. It's not free.

Dave (13:33): It's not, no. But that's the sort of underappreciated side of all of that data that we're able to pull and compare, and that becomes, like you said, the foundation of this price opinion.

Nick (13:47): But even from there, that might get us eighty percent of the way. There's sort of this twenty percent where there can be a lot of disagreement about what makes the — what we call the subject property, that is you as the seller, your property that's being compared to everything else — what makes the subject property unique, for better and for worse. So this could be location within a neighborhood. Does the house back up to a busy street? That's something that doesn't just automatically show up in MLS data that we pull. Does it need a new roof or new HVAC systems, or have those just been replaced? What are some of the other things that come to your mind that you really just can't account for in a data set, but that can have a real significant impact on the home's value?

Dave (14:35): It can be a lot of different things. Even just walking — and that's kind of the real value add of the agent — the experience of walking a property, if you've already walked competing properties and you're active in your local market, is to be able to go through and like: maybe this house feels really dark. Maybe this section of the neighborhood feels a lot nicer than even just a section down the street a little bit. Or, once again, like you said, geographic positions are a big deal. And then the in-person feel of the house, right? Four bed, two and a half bath here versus there — I mean, both could actually be remodeled and say they're remodeled, and one house could be, they did the absolute cheapest finishes, they were done by Handy Andy, and then the other house could have been fully remodeled — I did air quotes, if you're just listening — and actually had a really professional crew do it.

Nick (16:04): So it's, as you said, eighty percent data, but there also is an element of feel in pricing the house, and knowing what your market is. If you're in a neighborhood that has a lot of diversity in terms of the house type and size and finish quality, then that can make a huge swing — versus if you're in more of a subdivision where housing and finishes are effectively all the same. That interior feel of the house might not swing the price nearly as much as if you're in a neighborhood that has a lot more diversity of finish quality and architectural style, let's say.

Dave (16:50): Some might even say the pricing is more of an art than a science.

Nick (16:57): The inside joke there is I made that comment earlier and Dave wanted to slap me for it, mostly because of how clichéd it is, I think.

Dave (17:06): That was what I was looking for earlier. There it is. "The house is worth what someone will pay for it." That's the cliché. Glad we got that out.

Nick (17:20): So yes, there are those variables that are important to account for. And really one of the things that we'll flag here — and this is what makes I think this episode valuable for sellers — is these are the kind of questions that you need to be asking your listing agent. Not just the data set that they pulled, but actually: okay, the data, that's fine, but what are the unique things about my property that you are weighing that you think either adds or detracts in value? Because I think that's where the really interesting discussion lies when it comes to having a pricing conversation. And that's also how, whenever Dave and I are serving a seller, we're conducting our own CMAs, and then he and I come together to talk about it. And it's interesting that we pretty much never come up with the same initial number — because inherently we're valuing things differently, and that creates some really good discussions between he and I that then lead to what we feel is a really solid range on realistic market value for a seller.

Dave (18:42): I think the eighty percent — if we're saying eighty percent of this is math — if you're listening to this podcast you're probably already interested in real estate, and you've probably seen a Zillow estimate or a Redfin estimate. That is just software doing all of that back-end computation. And for the most part it is pretty accurate. Zillow usually has access to all of the same MLS data that brokers do, and it's keeping an updated toll.

Nick (19:13): Just real quick, I think they say on average it's accurate within about seven percent.

Dave (19:20): That's interesting, I didn't know that. So if you're saying seven percent, and then what did we say — eighty percent math and twenty percent art? That twenty percent oftentimes doesn't get adjusted until we've actually walked the property. So we might have an idea coming in based off of pulling this data, doing the Zestimate, if you could say — and granted, we're going a little bit deeper, we're filtering and controlling more for the specifics of the subject property, like beds and baths, general square footage, the type, whether it's an attached townhome or detached, stuff like that — where we can hopefully take the estimate number that you'll see on any real estate listing website like Zillow or Redfin and dial that in even more. But I'd say the real movement happens when we walk the property in person.

Dave (20:31): And then that's where, as you said, we're not going to arrive — we'll do our math, we'll pull the comps on our own. And I'd say that in general we come up pretty close. Sometimes Nick will catch something that I don't, and vice versa. And then we can really dial in when we're walking a neighborhood and the subject property, and having two sets of eyes to really see: hey, I noticed this thing about this house in the neighborhood. Or I noticed this when we were walking the property — there was this smell, or the floor felt a little soft here, or this was done really well over here, and the framing of this tub by the window, and the living room is facing south. All these things add up that help us start to put together, well, one, the marketing plan, but two — is this better or worse than what we've seen in this neighborhood?

Nick (21:20): Yeah. Really trying to envision the buyer profile who's most likely for any given home that we're marketing, and then what's that buyer's experience going to be walking into this home compared to anything else that they're likely going to be looking at on those same tours. And just to tease it — next week we're going to be talking about, because this conversation of pricing goes hand in hand with home condition, and the different sort of improvements and things to do or to not do in order to maximize both value on your home as well as to help it sell as quickly as possible. So we're kind of teetering on that line of, all of a sudden that conversation becomes a really important one to have of, hey, here's a few strategic things to do that will really help you sell your home and get the best value out of it. But the point for now is that yes, we're working hard to get as close as we possibly can to a realistic fair market number. And that really is the broker price opinion: this is what your home should sell for in a normal market under normal conditions, with interest rates being what they are today. Boom, here it is.

Nick (22:42): Now, this is where we'll kind of pull back the veil on the typical real estate playbook. If you ever want to go for a trip, just Google or YouTube "real estate coaching." There's all kinds of fun coaches to listen to online who teach all sorts of shady things to bright-eyed agents looking to maximize their commissions. And we're kind of allergic to that stuff.

Dave (23:10): Which I'm grateful for.

Nick (23:14): But there really tend to be two strategies that many agents will use in listing appointments. One is buying the listing, and the other is trying to get the seller to list as low as possible, so that it assures as quick of a sale as possible — which means the agent is assured of a paycheck in as short of a time period as possible as well. I kind of just summarized the second one. How would you describe buying the listing?

Dave (23:49): Well, buying the listing — so what we're saying is, you're a seller, and I've never met a seller that said, "Nah, forget it, I don't want the most amount of money for my house." So maybe you're just listening and you're like, "I don't even really know what's going on." We're talking if you're interviewing multiple agents. And so much of real estate is relational, and hopefully you get a good reference from somebody who's had a really good experience. But if you're just interviewing agents and it's sort of a cold meeting for the agent — you're meeting this person for the first time, you don't really have a relationship — they're really incentivized to tell you you're going to get the most possible for your house. Nobody wants to be the bearer of bad news. So if I was going to, as Nick said, buy the listing, I'm going to tell you that the house is going to sell for the very tippy top end of fair market value, if we're saying it's a range — or maybe even more, if the market's a little bit hot.

Nick (25:09): Hypothetically, I would say — well, if we're thinking 690 is fair market value for this four bed, two and a half bath house, I might tell you, no, I think 715 is pretty reasonable. And if you interviewed two other agents and they all came to the same conclusion, that the fair market value was actually closer to 690 — well, if you don't know any better, who are you going to go with?

Dave (25:34): Probably the one that tells you "I can get you 715."

Nick (25:39): And so then you sign a contract with this person, and you list the house, and then what happens? A couple of weeks go by, no offers, and you get that phone call of "hey, have you considered a price drop? I think it's time to price drop."

Dave (26:06): I'd say — it's hard to put a percentage on this, but if your agent seems really desperate, and they seem to just be telling you everything you want to hear, and there's no pushback at all, and they're just nodding their head the whole time — that could be a reason to take a pause and really assess: does this person actually know what my house is worth? Are they actually confident about the number they're telling me, or are they just agreeing with me so that they can get me to sign the contract?

Nick (26:40): Because in our experience — if we're saying the three listing strategies are low, fair market value, and high — high is usually the worst one you can do, barring a couple of very specific circumstances. You're going to pay for that listing by having increased days on market.

Dave (27:05): Now, the caveat is once in a while in a really hot market you might get lucky. But the conventional wisdom would actually say the opposite is better in a hot market. Once again, this goes back to it being a grey area. But in general, you would want to be careful if somebody's going to just say, "No, no, I think the very top end." Like if you interview three agents and two are close to 690 being fair market, and one of them is thirty grand over — that could be the most expensive thirty grand you try to buy yourself.

Nick (27:48): Absolutely. If you're getting an outlier — this is one reason why it's just so important to interview multiple agents. And we say that as agents who would love to earn your business. But you need to get multiple people who are giving you a broker price opinion on your home, so that you can have some sort of a baseline. Do these numbers all coalesce? Do we have extreme outliers? And then when you have the outliers, you really need to test those things. Because in all likelihood, if fair market is 690, if this person doesn't have an unbelievable marketing plan and something that is super convincing that sets them apart from every other agent in the industry that's going to help you get that extra twenty, twenty-five grand — then they may just be trying to flatter you. And we would call that buying the listing. Which feels really great up front. It doesn't feel so great six months later after forty grand in price reductions and a stale listing and you're sick of the agent.

Dave (28:52): No doubt. So then what is the flip side of that? Would that be — I don't know, if we're calling that buying the listing, are we calling the other underpricing? Phoning it in?

Nick (29:08): And this is a tricky one, because this is one where especially really experienced agents can be shrewd. They'll lean on "hey, it's a really tough market," and they'll weight the comps towards the things that are on the lowest end of what's fair market value, and really emphasize how days on market and price drops make your home look like damaged goods, and how you need to avoid that — and the only way to avoid any of that is to list fifteen, twenty thousand dollars below fair market value in order to drive interest and a quick sale. And they're really prioritizing that quick sale. And they can be very convincing about why it is you need to list so far below.

Dave (29:52): Well, they might not even call it below fair market. They might just anchor in a similar way. Where one agent that you're interviewing may be the outlier that says high, you might have another one whose fair market value is really on the low side. That's another area where you really need to test, and not just be swept up by their amazing track record of closing sales. Yes, that's important, but it can be a performative metric — because anybody can sell a home if it's consistently twenty thousand dollars below market value.

Nick (30:32): If you're almost giving it away, it's not hard to give a lot of it away.

Dave (30:38): That's more or less what I'm saying. So you really want to test that strategy as well, to make sure that you're not leaving money on the table.

Nick (30:54): And what's tricky about both of these situations is that there can be perfectly legitimate reasons to list high above fair market value — like you said, Dave, they're limited reasons, but that doesn't mean that they're bad ones. And there also can be real reasons to list below market. And frankly, we've done both, and feel good about that. But the difference is that the strategy behind whether you list high, whether you list low, whether you list at market, depends on one, having a good understanding of what market value is, and then two, making sure that that's a decision that you as a seller come to with clear-eyed advisement from your agent — versus something that's being pushed upon you by an agent because they're either desperate for your listing, or because all they care about is a quick sale and a quick commission.

Dave (31:55): Maybe just to double-click on coming in low: it seems that oftentimes agents who are doing really high volumes, and they're taking a lot of meetings for potential listings, might not work nearly as hard to really refine that eighty percent number. And a lot of the time in a market that's appreciating, that number is lagging what the actual appreciation is. So let's just say the Zestimate for this example house we have might say 680. And if you're a really busy agent and you're already serving clients, and you get a call — you're in business, you're always going to take more business, but your potential listing is probably not stacking nearly as high in importance as their current listing. Or at least hopefully, if they're serving the people who they're actually working for, well. So you need to understand coming in that experienced agents don't want to overpromise and under-deliver and get in this situation where you as the seller are like, "Well, you said it was going to sell for this." So it's a lot easier to come in and under-promise what the price is.

Dave (33:18): And then, the one situation where a lot of the time agents will list low is if it is a really hot market. You list ten grand under fair market, you can actually get the house into a bidding war, and that's something experienced agents do attempt to do. So like Nick said, it's reading the situation. But maybe the real recommendation coming out of this is that you should do your own research. You have a lot of tools as a consumer now that are at your disposal with Zillow. You can get a lot of the same information — not all of the same information that agents can get, but it's not the same thing as it was before the internet, when agents really had gated data on housing. The MLS was essentially like a back-end faxing paper network, where if Nick and I sold a house and had another one for sale, we'd send that out to all the other brokerages in the area over fax, or even a book they'd mail out. And so — do your research. Be an informed seller, and interview as many brokers as you feel comfortable with, until you feel you have a solid understanding of what your home is worth.

Nick (34:54): The more data you have, the better. And it's also important to know — as we've talked about this and started with the preface, hopefully it becomes a little more clear that not every agent has bad intentions. Some of them just genuinely come to different opinions on the value of your house. And that would be the — if we just sold the idea that every agent was out here, and somebody comes in at 710 on this house, and you're like, "You're just trying to tell me what I want to hear" — well, that could be. It could also be that they just genuinely think your house is worth more. And if you have two more people who agree with that person, then maybe the guy who thinks it's worth 690 is the guy who's actually just trying to phone the sale in and make sure he — or she, the agent — gets a really good slam dunk, quick sale.

Dave (35:50): That's excellent. And so I think here it'd be helpful to just dive into: all right, what are the trade-offs to pricing low, to pricing high, to pricing at market value? Because each one kind of has its own inherent risks. There's not a one-size-fits-all. And so you already sort of mentioned it, but let's talk about the risks of pricing high — like, not just the risks, the positive sides too. Who should price high?

Nick (36:29): People who have diamond hands. No.

Dave (36:31): There's a stock market joke. Diamond hands means you never sell the stock, because you're willing to hold in there. You're so convinced it is only ever going to increase in value.

Nick (36:45): People who can afford it. It really is people who can afford to price high. And that can mean both in dollars and time — and it's primarily the time. It's the days on market.

Dave (36:56): There's an expectation — at least, hopefully, if you paid any attention in real estate school — if you price higher than what fair market value is, you're really hunting for a buyer that wants this house bad. Because hopefully they have done their research and have a good agent who can tell them, "Yeah, this is going for more than what fair market value is." So if you're willing to wait, and also if you're really convinced that your home has something really special about it — it has a view of the Columbia River, or —

Nick (37:33): Three months out of the year.

Dave (37:38): I thought we agreed to stop talking about the weather on the podcast. It has a view of the river. It backs up to a golf course. It backs up to a green space. A lot of those geographic things that don't come through on just a data sheet of beds and baths and square footage. Where somebody who's looking for — to keep the example — four bed, two and a half bath, they're going to, if they're walking houses in your general vicinity that are for sale, and they walk into yours and they see, my gosh, we got a slight view of the river, and maybe the backyard is really secluded...

Nick (38:28): If you're really confident that your house has some unique things about it, it really has a draw — that would be where you might press in on going above the fair market. Again, fair market is just a number that's extrapolated from similar houses that have sold around you. But if your house has something those houses don't, that's where the discernment about the product you're selling matters. So the main thing is: if you can afford to stay on market longer, and you actually think that there's a decent argument that your house is better than what the straight down-the-line math specs are — that's when you would want to go.

Dave (39:17): And really here too, your risks are days on market and the likelihood or probability of needing to do price cuts in the future. But what's really key is recognizing and owning up front that you are listing high. If your broker is giving you an honest opinion that your house is worth 690, and you want to list at 720, you need to at least agree that, yeah, I think my broker is right in their opinion, but we are going to list high in the off chance that we get a buyer in those first couple of weeks who's just in love with this property and is willing to pay the premium for it — or because that higher number is an anchoring point.

Nick (40:18): And so maybe your thought is that, well, we probably won't get 725, but we might get somebody that offers 700, and that's still ten grand more than the 690. And so by anchoring high, we've given ourselves significant room to negotiate down and still end up in a better position than what the agent recommended for fair market value. It's a legitimate approach. It is a risky one, because sometimes it works out where you just find that right buyer the opening weekend. We always tell folks that hey, if we're going to go with this strategy, we're going to give it two, maybe three weeks. But if we don't get a buyer, if activity drops off, if there's no activity in those first couple of weeks, we're going to price drop pretty aggressively right away to get it back closer to that fair market value. Usually by having that conversation up front, that takes a lot of the frustration away, and the disappointment of "I thought we were going to get the 725." Just setting expectations up front helps smooth over a lot relationally.

Nick (41:32): So this is your seller's warning, directly from The Tartan Team: if you interviewed three brokers and two of them said 690 was fair market value, and then the third one says "maybe 700 is fair market, but I'm willing to list high at 715 or 720" — and you feel that fair market value is 720 — just buckle up. You're probably going to be disappointed.

Dave (41:56): Exactly.

Nick (41:58): And we will be candid with our clients about, like, it's probably not a good fit. And I say that to say — that is a real person that real estate agents have to deal with, and that is why there are so many people who go the other route of just phoning in these appointments. Like, "listen, I've been burned by sellers who just are unreasonable." They say, "I'm not going to take a dollar less than 710 on this deal," and they just can't accept the reality of the market having shifted. Maybe you have in your head, "well, my neighbor sold his place, which is not nearly as nice as mine, for 730 in 2022." And the unfortunate reality is, in this whole conversation you have to keep the ambient market realities ever-present in your mind — of interest rate and buyer demand and local demand also. So there you go, that's your Tartan disclosure warning: don't be the consumer that forces agents to just phone it in, because they realize you're not going to deal with the transaction reasonably.

Dave (43:18): And the flip side of that is, if your agent can't make a solid argument for what their pricing strategy is, then you have every right to say, "Yeah, forget about it." If you can't show me a reason that this place is worth 690 instead of 720, then you have a good suspicion to think that the agent is kind of just phoning it in.

Nick (43:49): Which transitions then into: okay, well what about the list low? What are the trade-offs there? Who's that the best fit for, and what might they be risking?

Dave (43:58): So list low, unfortunately, most of the time is desperate sellers — a motivated seller. Maybe you're buying another house and you're already under contract, and that sale's contingent on the sale of your current home. And at that point it's like, well, how badly do you want that new house that you went under contract on? Probably pretty badly. And are you really going to blow that deal up to try to make an extra five grand on your current home, and really hold the line?

Nick (44:36): So that's in general — a motivated seller is the primary reason to list low. With the one caveat we already mentioned, of some experienced agents, and this we would recommend to tread lightly with. We'll list low in a very hot seller's market to try to drive up a bidding war. But you have to be very certain that there is the demand in your local market, and even more so your local neighborhood, that you can achieve that kind of outcome. Otherwise — kind of in a similar way to anchoring high — if you anchor low and the multiple offers doesn't work out, you end up misjudging the interest in your property for whatever reason. Maybe it's still a great property.

Dave (45:25): You're in trouble, right? There's not a lot you can do. You don't really have levers for price cuts. Well — you do. You can always come down on the price, but then you're just falling further and further below what the actual value of the house is.

Nick (45:45): That would be a big miss. And so the listing low is always done realistically. You can tell already we're working towards the center of just listing at fair market value — which is a hundred percent conventional wisdom.

Dave (45:58): It's conventional wisdom for a reason. But the flip side of all this is, if you have an agent that isn't interested in even having these discussions, they're showing their colors a little bit that they're not that interested in talking about what is the best strategy for you. That's a huge part of the interview process — or at least it is of our process, and hopefully it is of more agents' process — of understanding what are your reasons and motivations for selling, and how important is the sale of this home in terms of being critical from a time perspective to your life.

Nick (46:45): The real advantage to the list low is that it does provide you with the greatest level of certainty that the house will sell, compared to all strategies. It also offers you the least amount of assurance that you're going to get top dollar for the home. Because the risk is that the demand actually materializes in the way that you and your agent are hoping that it does. And sometimes it does, sometimes it doesn't. But if you need certainty that the property is going to sell, selling it for a bit below market value may be a perfectly legitimate trade-off. It's just something that you as the seller should be aware of and be in control of — knowing how much it is that you're potentially leaving on the table.

Nick (47:30): With fair market — which it feels like all of this is kind of driving to — are there any trade-offs? Is it just the perfect strategy for all sellers? Just list what the house is worth, man.

Dave (48:00): I mean, there's a trade-off to everything, but in general that is usually our recommendation. I think the one time we might say list under is if you're in a circumstance where you're selling something that is really hard to distinguish from your competitors. So that's like, if we're talking townhomes, if there's a lot of stuff for sale around you that's effectively the same from a specs standpoint — bed, bath, square footage — then that's where, one, I'll say the effort towards marketing can make the biggest difference, if the property isn't selling itself inherently on its merits.

Nick (48:55): That's where an agent who's going to really put the effort into the marketing can really move the needle. But outside of the marketing that hopefully your agent will be doing for you, the one thing you have to compete on is price — and that's where coming in lower might really help move the sale. But in general, for most markets, the advisable thing is to list at fair market. And the thought process there is you're not going to anchor yourself low, but you're also not going to squash interest in the property in the first two weeks, which are for the most part the most important weeks in the sale of the home. It's in general considered a success if you have an offer on the table within two weeks of list.

Dave (49:48): And the best way to do that is to not look like you're the guy trying to get premium — especially if you don't have anything that commands that premium in your house.

Nick (50:00): Because there's an art to this — double down on that, not a perfect science. Even when you list at fair market value, it is not a guarantee that the house is going to sell without needing to do price drops. And that's just kind of an unfortunate bug within the real estate market. It's always been there, it's just inherent to how homes sell and trade — that interest rates can jump, there's geopolitical things that happen, wars that break out, politics and elections, and all of that can have a huge impact on just buyer sentiment. And so while everything is dynamic, so are house values. And it's crazy how quickly things can change, or how we might have a wonderful set of comps and one of the homes that was pending all of a sudden closes for thirty thousand dollars under the list price, and that hits right after you go live on the market, and it resets things. And so even when you list at fair market, there is a need to have an open-handedness toward, okay, this isn't a perfect number, there's no guarantees in this life, unfortunately. But all things considered, I do think that listing as close to fair market value as you can is the best way of maximizing not leaving money on the table while drawing real interest from the jump.

Dave (51:45): I guess the one thing to take away, if you haven't already heard in the going round and round, is it really is an art, I'll agree. And it is grey, and everyone is going to interpret the numbers slightly different. So if there's one thing you can take from the podcast, it's that you should do your own research and you should interview multiple agents. Unless you're an investor, you're not buying and selling houses very often — on average, seven years. So if you stay at the average, you could only maybe do three, maybe four in your life. And so it's a big thing, and it has a very large financial impact in your life. So the main thing would be: understand your market — both your broader market, say Clark County, and then also your local city-level market, and then even down to your neighborhood — and just have an idea. Go in with a little bit of healthy skepticism, and don't just jump at the first number that sounds good to you.

Nick (53:00): Really at the kitchen table, when you're meeting with an agent, really challenge them on not just "all right, what's my house worth," but really dig into the methodology of, okay, how did you get there? And it's not just "what is this house worth," but "what is my house worth," which really needs to take into account your unique situation. Because like Dave was saying, if you need to sell this house in order to purchase your next house, and you've already identified what that house is, you might need the speed and certainty — which I would say strategically is a great call. No harm, no foul in you listing low and selling quicker. And vice versa: if you have a unique property that's really, really hard to find comps for, and there's some features where you know that, hey, it might be a small buyer pool, but if we find the right buyer for my house, it commands a real premium — well then shoot, it might be worth listing much higher than just what the data says, as long as you're aware of the trade-off that it might take longer to find that exact buyer profile.

Dave (54:24): And then finally, I think at that kitchen table, having the adult conversations about: what do we do if things don't go according to plan? Because plan A always sounds great on paper, whatever strategy it is that you agree to. And we love it when plan A works, and sometimes it does. I don't mean to be cynical about this, but often — especially in this market where things are pretty tight financially for a lot of people — it's been a tough time to sell homes, just candidly. And so having the conversation up front about, all right, what is plan B? What are the triggers for either a price drop, or even for pulling a home from the market? Knowing those things up front, being on the same page, having that relationship with your agent, can head off a lot of frustration and just kind of emotional turmoil throughout the process. Anything you'd add on, during that listing conversation, the kinds of things around pricing that should be discussed?

Nick (55:24): No, I think we've done it justice, and we would just be retreading. I think your final point about having a plan is excellent, Dave — that the real value an agent brings hopefully is experience, but it's also being a sounding board in the emotional moments of "this isn't going the way we wanted it to." And so hopefully your agent prompts having that discussion ahead of time. And if they don't, then definitely ask them to — of like, all right, you want to list at 720. If that doesn't work, what is the plan? What do we do?

Dave (56:09): Right. I think that's great. I think it's so often these conversations get brushed over and just "hurry up and sign this listing agreement, and then yeah, we'll be in touch," you know, that whole deal. As an industry we can do better. And hopefully if you're an agent listening to this, you have taken away a few things that help you refine your own process when you're sitting across the table. And more so, speaking to potential sellers — hopefully if you're listening to this, you take away some strong thoughts of, all right, I can feel better equipped in interviewing agents, and in understanding the process, and what my home's worth.

Nick (56:55): Absolutely. Dig into the data, the resources that are available to consumers now. It's really an amazing time in terms of having access. Always let us know your thoughts in the comments. Get in touch with us — thetartanteam.com/book, or dave@thetartanteam.com, nick@thetartanteam.com. We'd love to have these conversations. One thing too — of course we'd love to help you list and sell your home. Also, if you're thinking about, "I'd like to just kind of start thinking through this and want some coaching" — that's one of the unique things we offer, is that we do have some consulting. So if you're just like, "show me how to use the tools, pull together data, so I can figure out a bunch of this myself," we'd love to help you in that journey too. You can learn more about that at thetartanteam.com. Subscribe, like, all the rest. Thanks for being here. We'll catch you in the next one.