Experts

The Art to an Effective Pricing Discussion

Pricing a commercial property is arguably the most difficult task agents face in their commercial real estate lives.

If you want to give your listing the best possible opportunity to move, getting that number right is critical, and it’s something that needs to be practiced weekly at your agency, according to Dan Spencer.

Here are some of his key recommendations for generating the best possible pricing discussion with your clients.

Generate your own research

Spencer says agents shouldn’t rely on general data when discussing prices with owners and landlords and can differentiate themselves from other agencies by framing their own market.

“Printing stuff out from online, whether that’s CoreLogic or other, what often happens is if they (vendors) have seen another agency print out the same list, they turn around to you and say, ‘I’ve seen that list, what do YOU think’,” Spencer says.

“There lies the issue: you’re shooting from the hip with a price. You’re just telling a price without filling them out first. The problem with that is once you shoot that price off, you own that price.”

Create a price compendium

Spencer says one of the best ways to demonstrate potential price points to your clients is to create a compendium of similar properties that you can talk them through.

Each property in the compendium should have a photo, as well as being listed in price order and market order, allowing you to show the client what the properties leased/sold for, who they traded to and how long they were on the market.

“Look at their eyes and see how they react,” Spencer advises.

“If this one leased for $30,000 or this one sold for $2 million, the question we’ve got to ask is, ‘How much over that would those tenants have paid for yours?’. Flushing that price out and asking them that question, typically if they’ve got a position on price, at that point it will come out. You’re using that technique to flush price out.”

Get them off price and onto process

While many vendors will have tunnel vision for the bottom line, Spencer says it’s important to steer them away from focusing purely on the price that they’re expecting to achieve for their property.

“My response to that is, ‘I can see that price is important. Can I ask you how you came up with that?’ Often how they came up with it is that they needed it,” he says.

Instead it’s about taking them through a detailed process that will help them understand and come to terms with what the best price range for their property might be.

“What I want you (the agent) to be able to do an hour into the conversation, is be in control of you saying yes or no to their listing, not them saying yes or no to you,” Spencer adds.

Timing and Competition

A big part of arriving at the right price is discussing with the landlord or vendor how critical it is to nail the timing of the listing, and particularly if they’re expecting a result over and above what the market is telling you.

“With the right timing of the price and the timing of the strategy, finding the buyers in the first week or two usually means they shift their first offers up higher,” Spencer says.

“We need to get those tenants and those buyers seeing that property all at exactly the same time. What happens when they have competition is that they begin to ignore the data … and focus on what the next person is doing.”

Know your data

Having a full and complete picture of the market you’re selling or leasing in is about more than just knowing the prices of comparable properties.

Spencer says you need to know how many properties are being listed and traded every month in each market segment – entry level, middle and top end.

This is critical information as you take a property to market, as it very quickly lets you know if it’s been priced correctly.

“If there’s 120 leases that get taken up in your marketplace every single year, what that means is that every 30 days, 10 get taken up,” Spencer explains.

“What we know about that is that if a property was to go live on realcommercial.com.au, there will be 10 different businesses considering leasing a property at that period of time. So the pool of tenants, there’s actually 10 of them.

“So if we’ve got to wait two or three months for these people to turn up, the argument is that if no one has actually enquired in that first two or three weeks … eight people have already bypassed it.”

“You need to know every 30 days roughly how many buyers transact in that marketplace. The language needs to be, ‘Mrs and Mrs Vendor, we know every 30 days six, eight, 10, 20 buyers buy in this price bracket. So if we’re on the market for a week and nothing’s happening, we know five buyers have already bypassed it, and that’s when we need to look at a realignment.”