As the heavenly real estate market that we have experienced over the last five years comes back down to earth, many agents have forgotten -- or never learned -- the importance of educating consumers so that their expectations are realistic. Back in the early '90s when home prices had been flat for five years, agents knew that if they took a listing without having a serious conversation about how to price a home in a buyer's market, that listing was at best a waste of time and money, and at its worst a way to create an unhappy client who blamed you for their overpriced home not selling when the listing expired.

Unfortunately, both consumers' and agents' memories of what happens in an average marketplace seem to have been erased by the dizzying speed and price increases of the last five years. So let me help you remember, and suggest some action steps that can help you avoid some of the pitfalls that naturally accompany this scenario.

Not Easy, But Essential

The real problem is that agents never enjoy bringing up and talking about difficult issues, especially the emotionally charged issues of what price is your home worth versus what do you need to get out of it and I know you are being transferred in three months, but realistically its going to take six months to sell. Agents coming off the good market of the last five years simply have not had to have these conversations, and even when they took an overpriced listing, if they waited 90 days, it sold. The problem is that in today's market if you don't have this talk at the beginning of your relationship with your client, as the time passes, it gets harder and harder for you as an agent to start up the conversation without coming across as being out of touch because you did not bring it up at the beginning of the transaction.

In the end, the client will either ask for their listing back, it will expire and they will list with another agent, or even if you get the home sold, the client will blame you for the lower price and the length of time it took, and they will tell everyone in the neighborhood that you were incompetent. Ultimately, you will quickly be blamed as the reason that house prices in the area are no longer going up. Once this happens it will take a ton of time, money, and effort to repair the damage to your reputation.

The Costly Consequences of Bad Communication

You may be thinking this scenario seems a bit extreme, and you are right. But ask yourself, COULD it happen? Since it could happen, can you afford to let it happen? Only when agents face the reality of the consequences of not dealing with these difficult issues have I found that agents are actually willing to do something about them. So what can you do to avoid this?

First of all, you need to make a commitment to bring up some of the difficult issues with every one of your buyers and sellers early in the relationship. With sellers, make sure you talk about it before you take the listing. The best way to get the conversation started is by asking something simple that gets them to let you know what they are thinking. Ask the following questions:

• "John and Mary, what do you think of the current market conditions?"

• "What do you think you might have to do to get your home sold in the current market conditions?"

• "Which is more important to you, getting the price you want or getting your home sold quickly?"

• "What do you think would give you the greatest peace of mind and happiness over the next two or three years: selling for less than you want and moving to your next home or waiting to get the price that you want even if that takes a year or more?"

Soak It All In

As you ask these questions, resist your urge to talk and educate, simply listen. You will learn so much about what they are thinking, their motivation and most importantly, what areas that you must educate them about. After they have answered the questions, your response should be something like this:

"John and Mary, the reason I am asking these questions is that in a changing marketplace like we have right now, where we are coming off the strongest and longest run in real estate in history, I have found that consumers' expectations are often unrealistic. I know that if we don't discuss these difficult issues upfront that you will probably think I was not doing my job well if I bring them up later on in the process."

"John and Mary, I value my relationship with you enough to make sure I don't let that happen. So I need you to know right now that I think $XXX,XXX is the price that will give your home the best opportunity to sell for a good price in a reasonable period of time. Even then, if I pull out all the marketing stops to get your home sold and we are not getting three to five showings per week, then I know that we will have to reduce the price even further. John and Mary, I know this can be difficult to hear as a seller, but as a professional Realtor®, I know that some consumers believe that a real estate agent sets the price of a home."

"The reality is that the market sets the price of a home and a professional agent helps the client price the home on the line that will get them the most money in the time they want to sell it. I wouldn't be a professional agent unless I was willing to talk to you about this before you signed a contract. I know that some agents will tell you anything you want to hear about what your home will sell for until you sign the listing contract and then work on you to reduce your price after the fact. I choose not to work that way. I will tell you that truth so that you can make the best decisions for you and your family."

Don't Regret Your Decision

I know that having these types of open conversations can be scary, but avoiding them will create long-term problems and stress that are simply not worth the risk. What I have found is that once you try it, you will find that your clients appreciate your candor and you will generate a stronger more powerful image and reputation, and that you will be able to sleep soundly every night knowing that you have done what is best for your clients. Don't wait for the market to force you to have these types of conversations.