Overpriced Listings and Price Reduction Strategies
In order for a seller to reduce their price, they have to be told a number of times.
Business to business salespeople often say that it takes seven sales calls to get a customer, and twenty-nine calls to get a customer to trust the salesperson.
I don’t know if those numbers are correct. But, I do know that people get so emotionally involved when selling their home. Normal, nice, rational, smart people get all emotional and can’t understand how their home isn’t worth what they think it should be. And if you can’t sell their home for what they think it is worth, it’s your fault.
That is why we have to use as many methods as possible to bring them to reality so they will price their home competitively. If we don’t the home will expire and another agent will sell it for them. The sad thing is that agent will probably get them to reduce the price then.
Have you ever heard of Blitzkrieg? That is the German term for a very intense, focused, overwhelming style of warfare used by Hitler’s armies in World War II. Using Blitzkrieg, Hitler’s armies were able to take over most of Europe. Here is what made their warfare successful. When Hitler’s armies would attack a country, they would use every resource available to force the country into submission. The purpose about this illustration isn’t to show you how Hitler did a good job or was a good person.
Hitler killed millions of people and changed history. But it does illustrate the importance of using several different methods to get your sellers to understand that their home is overpriced.
Let’s go through the methods I use together:
1. Call every Week. Remember the example from above. Calling every week builds rapport with the sellers and lets them know that we are working and doing something to sell the home.
This is the biggest key to keeping sellers happy with you as their agent. I call them every week even if nothing is going on. I simply tell them that we didn’t have any showings, that other homes are still selling, and that we might need to reduce the price. Don’t be afraid to call them. Just don’t skip doing it for a while and then start up again.
2. Follow up on showings fast. Call the seller when you hear the feedback from a showing. This is the perfect time to ask for a price reduction if they haven’t been getting any interest in a few weeks.
3. Ask for a Price Reduction every 21 days. If you just reduced the price and the activity didn’t pick up, start asking for a price reduction after another 21 days. It will take them 2-3 weeks to agree with you and reduce the price.
If you give them the reason why the home isn’t selling (price and condition of course) they won’t call you and complain as much. “All that happens when I call Ben is that he tells me why I need to reduce my price’’, they think to themselves.
4. Don’t take pathetic price reductions. If you reduce a home from $659,000 to $654,900 it won’t make any difference. Turn down the small price reductions until you get the 5-10% that will cause the home to sell. If you go from $659,000 to $599,000 that is a meaningful price reduction that will make a difference.
When I take a price reduction, I always try to get it reduced to below the next round number that buyers look within, for example, I wouldn’t reduce from $267,900 to $252,000.
I would instead push for $249,900 and tell them that at $252,000 you are still competing with the homes priced at $275,000, which are probably nicer that this home. If you have worked with buyers you know what I mean.
5. Send them an updated CMA whenever I think it is necessary. I have found that not being too pushy with reductions gets the job done better.
If they are being very resistant and you know you have to be pushy, push but also send them an updated CMA and other competitive Actives to them in the mail. E-mail doesn’t work because they can just delete it.
6. Talk to both parties every week. Here is what can happen if you don’t. Let’s say the house was FSBO and then you listed it. The ‘“Macho Man’’ husband will have his ego to protect. First, he thought he was so smart that he could sell the home by himself.
Now that he has listed the home, if he takes a lower price it means that he has failed again. So if you just call him with the updates every week, he probably won’t tell the wife what is really happening.
“Honey, what’s going on with the home’’ the wife asks him. The husband replies, ‘’Well, I talked to the realtor today, and he said everything is fine with the sale. He thinks that we should get a buyer real soon and we just have to be patient.’’
Meanwhile, you’re telling him that the price needs to be reduced because you aren’t getting any showings.
7. Don’t feel bad that you are asking them to reduce their price. The biggest objection that all realtors face is not the objection from the seller or buyer. It’s the objection in our own heads. It is not our fault when a home declines in price.
All the FSBOs that sold themselves when the market was Red Hot in 2013 told us then that we couldn’t take credit for the increase in prices. Is it any different now? Here is how I look at it. If a seller is motivated to sell by a certain date and we don’t actively tell them to reduce their price every week to sell by that date, we are doing them a disservice.
When they are up against the wall and strapped for time they will reduce the price below market just to get the home sold. Or, if they are unmotivated, but determined to get a certain price, they will keep the home on the market and then finally try to sell FSBO.
And some cheap buyer will make them a lowball offer and they will take it and net what they would have if they had been listed with you.
8. Tell them what you are doing to market and promote their home. This will constantly re-affirm with them that you are trying to sell their home. Send them copies of the ad whenever their home is advertised. This protects your reputation whenever someone at work wants tells them to fire you and hire their ‘’hotshot’’ friend who is a realtor and has this supposedly ‘’great’’ track record.
9. Quote the Statistics. Here is what I tell sellers. Right now, we have 1,650 homes on the marketing in _______ County. Last month, 125 homes sold in _____ County. If you look at those numbers and no other homes come on the market that means we would have 13 months’ worth of homes on the market, right?
Last month, we had 345 homes come on the market in ______County. What do you think that does for the value of your home when it has that much competition and that few buyers looking for a home?
10. Be on their side. All of us have our seller’s best interest at heart. Tell them that you don’t want to reduce the price, but the market is telling us that is what must be done.
Here is what you say when the seller tells you that you are just trying to reduce their price to get their home sold quickly so you can get paid: ’’A home is only worth what a buyer is willing to pay. And all of the buyers are being subjected to your home because it is being advertised and all the other realtors know about it. But so far no buyer has been willing to pay $279,000. So it must be a problem with the price. Doesn’t that make sense?’’
Using the above methods I am able to get unmotivated sellers to reduce their price. I told the former seller I talked about all the reasons that he needed to sell his home. He realistically was not very motivated to sell. I told him that he could sell today for $172,000 or in 6 months for $165,000. The logic was simple and that is why he took the price lower than what he really wanted.