Knowing The Sales Pitch Game

A: Every seller that decides to interview brokers to possibly use to list, market, and sell their home should be aware of the 'sales pitch' game. The basic principal behind this game is a 1-2 punch that generally makes up the broker's agenda: first, GET the listing agreement signed and SECOND, get the price down. In order to get to the 2nd part of the plan, the broker needs to seal the deal first and that means buttering you, the seller, up! Not all brokers behave this way, but enough do to warrant a discussion on the topic. After another call from a seller asking me for advice because a few agents pitched him with very aggressive valuations and no marketing plan, I figured to make a post out of it.

First off, I have not been servicing sellers since I left Halstead in mid-2009; and I have always been more of a buy-side broker. It's been my niche since this blog started to become known. However, I have worked with enough sellers and went on plenty of sales pitches in my 6 years to be able to discuss such a situation.

Now, one of the tricks in this business is the practice by agents of throwing around insane property valuations to potential sellers as they work to secure a listing agreement. It is a well known fact by brokers everywhere, that sellers typically interview multiple brokers before signing on with any one sell side agent. Now STOP!

Because of this, a few things occur:

1) sell side broker's are aware of competition for the listing by other outside brokers
2) sell side broker's are aware that the chances of making money/deals rises dramatically if they can secure the listing for X months
3) sell side broker's are aware that the seller WANTS to hear that their property is worth a lot of money
4) sell side broker's are aware that once they get the listing, they can work on price reductions afterwards
5) sell side broker's are aware that the initial suggested valuation or starting price recommendation is their best chance to secure the listing
6) sell side broker's are aware that the seller is most likely to work with a broker who quotes the highest price for their property
7) sell side broker's are aware that the seller's willingness to hear that their place is worth as much as possible will often blind them from any quantifiable data available proving otherwise

...these are some powerful forces! But are seller's really this easily duped? It seems logical that most sellers will see right through this? But in my experience, its the other angle that makes the seller more willing to work with the broker quoting fantasy valuations. What I mean is, the brokers that quote realistic valuations which may seem low to the seller MAY come off as non-aggressive to the seller. Think about it. As a seller with a $1M apartment to move, which broker are you going to work with:

BROKER 1 (Inflating Valuation to secure the Listing): Insisting how hot the market is, how many clients they already have lined up, and how they alone could procure at least $1.1m to 1.15m in qualified offers for you within the first 4 weeks.

BROKER 2 (Realistic Valuation): Giving you actual data to show you how the market is doing and where comparables in your building have traded. Explaining and educating you how the market dictates value, not the brokers, and that realistically you should expect bids to come in around $1M. Outlining a clear marketing strategy customized for your price point and product.

One broker comes across as aggressive, a go-getter, hungry and willing to do anything and everything to sell the sh*t out of your apartment while quoting a very high valuation. The other broker comes across as realistic yet perhaps less aggressive, and more as a teacher educating her student where this market is and what you should expect to sell the place for. Its a numbers game, so who do you think has the edge over the longer term!

Now, it is VERY important to understand that there are many agents out there that do not practice this way, and in fact, have zero interest in working with an unrealistic seller. Whats that famous saying again, "Its best to be the 1st born, the 2nd wife, and the 3rd realtor!"

I guess there is some truth to that. I was never the best sell side sales pitcher because of one reason, I always told the seller what I GENUINELY THINK their place is worth! And that value is usually significantly lower than what the competing brokers suggest leading the seller to think I would not fight or try for the highest price possible. I always thought duping a seller with an unrealistic property valuation was more of a dis-service to the client and an insult to their intelligence?

I guess part of the problem is that at any time the marketplace is comprised of some sellers that must sell, some that are testing the market, some that really don't want to sell unless they get their #, and some that just want to waste broker's time and de-list the property once they get a full ask offer - yes, I had a few of those types of clients in past years.

But what really grinds my gears, to quote the famous Peter Griffin, is when a serious seller who has to sell has their mind poisoned by brokers acting in their own interests to secure a new listing; especially a high end one! This immediately will put the listing behind the curve and setup a situation for the property to get stale right when action seems to be hot.

THEREFORE, MY ADVICE TO THE CALLER AND SERIOUS SELLERS WHO NEED TO SELL - Be smart, Know the game and the tricks so you could sift through and find the truly best broker to represent your interests. You want to be represented by a broker that has a pulse on this market and advises you accordingly. Acknowledge that this market has improved but is still down from peak levels. Ask the broker one very simple question:

EXPLAIN TO ME WHY I SHOULD PRICE THE WAY YOU SUGGEST IF DATA IN MY BUILDING FOR RECENT SALES SUGGESTS A LESS AGGRESSIVE PRICE?

Try to be unbiased and remove yourself from the emotional element that your home is better than the rest, that your renovations are higher quality than the competition, and that your views are one of a kind and deserve a premium. Ask the broker to educate you on your competition and discuss very clearly their marketing strategy. Why is your apartment marketed one way over another? Pricing is the single most important element in the sell side equation; so to get it wrong will put you at a disadvantage. In the end, the market will dictate value and the closer you get to proper pricing the higher the chance you will get multiple interest and generate a sense of urgency; which should be the goal of any serious seller. Take advantage of market action while its here, because once you get into the dog days of summer I would expect the recent buy side aggressiveness to wane a bit.