‘Running the Odds’ is a simple technique to help sellers and buyers take some of the mystery out of pricing.
Here’s an example where my listing clients and I are trying to determine the best list price (somewhere between $799,000-$825,000).
Option 1: Sale Price Odds with $825000 List Price
<$800,000 = negligible ~ 0%-1%
$800,000-$820,000 = 25%
$820,000-$835,000 = 25%
$835,000-$850,000 = 25%
>$850,000 = 25%
Option 2: Sale Price Odds with $799,000 List Price:
<$800,000 = 10%
$800000-$820,000 = 10%
$820,000-$835,000 = 15%
$835,000-$850,000 = 30%
>$850,000 = 35%
The odds are based on my experience and my property evaluation, accounting for the current market conditions, which are bonkers in my local market (slightly less bonkers than a month ago but still bonkers). So yes, I’m fully expecting multiple offers in both scenarios. But I also know that the higher the list price, the fewer offers are likely to be generated.
(By the way, if you’re an Analyzer, don’t get hung up on the numbers in my example. You would need far more information to determine if I’m right or not, so just concentrate on learning the basic technique.)
Here’s the message I want my clients to get:
If they choose the lower list price ($799,000), the odds are about 10% that they’ll get less than $800,000 (if they only get one offer). But, conversely, the odds would be higher that they’ll get a sale price of $835,000 or more (65% vs 50%) because a more aggressive list price in our current market increases the odds of more offers. Right?
Of course, you can break this down further or show alternate scenarios, depending on what the client wants to understand.
Now, it’s up to the client to choose!
For example, if they don’t want to risk even a 10% chance of ending up with a sale price under $800,000, they may choose the “safer” list price of $825,000.
On the other hand, if they have a higher tolerance for risk and choose the more aggressive list price ($799,000), I believe they’ll get more offers, and therefore they have a higher chance of hitting a home run.
By ‘Running the Odds’ with your clients, you’ll provide options and allow them to make their own decision based on their risk tolerance.
So how do my clients feel about receiving this type of information?
They love it! They feel relieved and enlightened, like I’ve completely removed the mystery around pricing. What felt like a crap-shoot before now seems like a simple solvable problem.
Of course, this isn’t the only information I provide to my clients to help them make informed and intelligent decisions. For example, ‘The Big Picture CMA’ and ‘Pricing Psychology’ are two of the modules in the Agent Skills Master’s Program that help me arrive at the correct price range in the first place.
(By the way, I’ve just recently updated the module descriptions on our website if you’d like to learn more about these modules. Just click on the link above and scroll down to “module descriptions.”)
You can ‘Run the Odds’ on the buyer’s side also, using a similar methodology when you’re deciding on a price in a multiple-offer scenario.
What are the odds of winning with varying prices in a multiple-offer scenario?
‘Run the Odds’ to paint a clear picture and allow your clients to decide how badly they want the property.
This can be a great way to demonstrate to your buyer clients that they have more control than they think they do. Simply use your skill and experience to determine the different odds.
I’m curious if any other agents are using this method or something similar. Please let me know!
I’m always interested in fine-tuning my systems and procedures, as you should be too!
