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Gary St. Mar…, Real Estate Pro in Westford, MA

What strategies are you using to convince sellers that a price reduction is necessary....again?

Asked by Gary St. Martin, Westford, MA Tue Oct 21, 2008

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Gary:

Use the bucket theory.

Describe the market as a bucket (Use an actual bucket or at least a diagram). The home prices are still not at the bottom of the bucket but heading that way and probably close to 1% per month (look at your local stats for accuracy). At some point, probably in the next 6-9 mths, the prices will hit bottom and stay there for awhile. Probably for the next 2 years. Then will go up the other side of that bucket, reaching what they are asking for now probably in another 2-3 years later. You are looking at 4-5 years from now.

The question the seller has to ask themselves do they really want to sell or do they want to continue to chase the market while it continues to recede, wait until they pric comes up to where they are now (1-3 years) or be done with it, move on, and take advantage of buying a home at a very favorable price.

You are the person they hired, be firm with them, you are the expert. You may also want to get your Broker involved to explain the same to them. The reason being, and because being a broker myself for years, have experienced it and been successful, is that you have been married to these clients for months. You do not want to hurt their feelings and they are probably thinking that you just want to lower it to make a quick buck. Using a third party (and by the way, do it in your office, it makes it a business decision for the seller), gives it another perspective, another voice, and a managers experience, to say the same thing, but in a direct way.
It works 90% of the time. And it has nothing to do with your experience or professionalism. It is validation from YOUR MANAGER.

If you cannot get that help from your manager, get another agent in the office to help (not as effective) and if there is no-one in that office that can assist - change companies and get a non-competing manager that can. An effective manager can assit you in making 5-10% more deals per year.
Good luck and let me know your thoughts.
3 votes Thank Flag Link Thu Nov 6, 2008
Great question Gary! One of the best tools I use to bring my sellers into reality is "role playing." I simply say to them, "How can you sell a house, that you would not or could not buy today?" Then the stage is set. I literally ask them to imagine being the buyers of their home. Then we sit at the kitchen table, pull out a contract for sale and all of my CMA numbers and decide what we are going to offer for the house. We walk through, never getting out of character, looking at things we want repaired or added to the contract. We walk the inside and then walk the outside, as Buyers, not Sellers! Then, comes the number crunching from the comparable solds. I also pull homes that are immediately available within proximity of their home. Many times, there are other homes with more amenities which have been reduced in price because they have been on the market longer. I ask them, "Why buy this house, when you can buy that one?" Then, I gently pull them out of the role playing. I explain that it's much better in a tough market to deal in reality, then fantasy. If they cannot think like a buyer, then I tell them they have no business selling! If they are upside down, I explain the importance of an appraisal. Many sellers still misunderstand what an appraisal really is. They confuse this with home inspections. They also mistake tax value for appraised value. And, I do suggest getting an appraisal if there is a huge amount of difference between what they believe their home is worth and what the market is telling me. Here in the Charlotte, NC area, I'm seeing new construction reductions of $100,000.00 or more in some of our newest and most desirable neighborhoods. And, one new home builder I recently visited is selling homes in the $350,000 range, when those same homes were sold a little over a year ago for 450,000 or more. That builder's response is that they would rather not abandon the neighborhood and finish construction on the 2 dozen lots remaining. And, their logic is that it's better to have a completed neighborhood, then one that has been abandoned by the builder. Again, role playing is an effective tool for me. It immediately sets a realistic stage for me as a listing broker and realtor. None of us are miracle workers, but the expectations we are being faced with are super-human and very stressful! And, we all want to please our clients and help them land safely in such a volatile market! And, ultimately, I tell them that their realistic knowledge is ultimately more powerful for getting their home sold!
2 votes Thank Flag Link Mon Nov 10, 2008
If I were a Realtor, I would go in with the ammo to back this question and statement up:

Do you want to be a follower, or a leader?
Leaders generally get paid more.
2 votes Thank Flag Link Tue Oct 21, 2008
FIVE YEARS OLD!!!!

still relevant?
1 vote Thank Flag Link Sat Jun 15, 2013
Have your seller read Jack Schlenk's Blog, articles, Price it Right, Win - Win buyer/seller, Negotiate, Appraisal Value, or Market Value = Sales Price, Mortgage, Inflated value or Reasonable value.

Jack Schlenk, Certified Appraiser, Real Estate Broker, Chicago, IL
1 vote Thank Flag Link Mon Nov 10, 2008
First, I will not take a listing that the buer wants to list at an unreasonable price. With that being said, determine for sure that a price reduction is needed. Re-check comps and prepare a CMA to present if it is needed. But the real proof is relative statistics.

Trulia and other sites can provide statistics as to how many views a home is getting on their site. If the home is generating decent numbers and no viewings, that is an indicator that "something" is wrong. Check the photos, check the description, bring in a home stager for a consultation, and yes, check the pricing. Find the reason it is not being shown and attack that. Too often agents do not know any other way to create more traffic but lower the price. This discourages the seller and the agent alike. But finding a way to create a buzz around a home can bring high results!

If everything else looks to be in order but the price, and the seller isn't budging on the price, determine if they can financially afford to budge on the price. Maybe the reason is money.

Finally, if the finances is not the problem, feature the home on a few real estate sites. This will send hits through the roof. (On 1 site, I recently had over 5,000 hits on one property, in one week, that was previously getting 30 hits a week). Trust me, if you have those numbers and few viewings, lowball offers, or no interest at all, it is strong proof the owner is asking too much! If that doesn't change their opinion, I'd drop them or simply not persue renewing the listing at expiration. Jay was correct in a stating our efforts, and resources, can be better utilized with properties that have a higher likelihood of selling, yielding a better return for us! Hope this helps!
1 vote Thank Flag Link Thu Nov 6, 2008
A couple of things....is it priced right in the 1st place and is it getting traffic but either no offers or low balls?
If there is traffic; instead of lowering the price, I have found that increasing the BA's commission works wonders. If the price point, house, owners expectations are out of touch with reality, then I don't list the house, the ROI stinks, and I can better use my time marketing a house that will actually sell, with owners who have realistic expectations.
1 vote Thank Flag Link Thu Nov 6, 2008
Hi Julie,

I put the word strategy in quotes, because it kind of puts a negative spin on it. When googled, the first definition that comes up (meaning the most popular) is: "a scheme: an elaborate and systematic plan of action". I didnt want to give the impression that I would "scheme my seller clients". I feel that they just need to be educated, so that is the term I chose to use.
Web Reference: http://MelissaBMancini.com
1 vote Thank Flag Link Tue Oct 21, 2008
Hi Gary,

I dont use a "strategy". I just educate them on competing inventory, show them properties that have SOLD, and explain mortgage programs that would be available to their audience. I also have a sophisticated feedback tracking system, that they have access to. Once they are educated, they usually see the writing on the wall.
Web Reference: http://MelissaBMancini.com
1 vote Thank Flag Link Tue Oct 21, 2008
A seller needs to put himself/herself in a buyer's shoes. Ask why would a buyer choose your home over one of the competing homes.

explain to the home owner that just like he/she wants a good value when he/she buys good and servicer, so do home buyers want a good value. a buyer determines value by comparing properties. if your customer's property is priced above the competition it will not be considered a good value, and it will not receive further consideration.

good lick
0 votes Thank Flag Link Sat Jun 15, 2013
I help them to understand how many homes they are competing with in their price range first (notice I said price range and and not neighborhood); next I bring it down to their neighborhood level and if need be take them out to homes in their neighborhood so they can see for their own eyes how they stack up against the competition.
0 votes Thank Flag Link Sat Jun 15, 2013
Review the many articles on value on Jack Schlenk's blog. Price your listing right based the market data. The best market in Chicago only 45% of the listing sold. Review my article.
0 votes Thank Flag Link Sat Jun 15, 2013
if price of my brand is equal to someone brand price how to convice customer?
0 votes Thank Flag Link Sat Jun 15, 2013
I work in the San Diego county area where we have an abundance of Forec
losures and Short Sales. I really have a heart to heart before listing a property as to the real market. Regular sellers will need to be willing to offer the same discounts as the foreclosure banks in order to compete. They are probably not too happy about it but it is reality.

Another strategy is to show them how many people have checked out their properties for example on Realtor.com or other website where you can measure the activity on a weekly basis. If people are looking and they still don't have any offer - hence price is probably too high.

Vicki
0 votes Thank Flag Link Mon Nov 10, 2008
Hi Gary - I find that an effective strategy depends upon the seller's personality - basically are they more analytical, expressive, amiable or driver? That will determine how much I need to say, and how I will say it. This market demands a lot more of us in terms of selling skills, and personality styles are something to take another look at. When the seller is a couple or more, then we have to be able to determine the style of each and meet each of their communication needs, and be sure we have the chance to speak to each of them ourselves. Hope this helps!
0 votes Thank Flag Link Mon Nov 10, 2008
Gary, that is a tough one. If the seller relied on your advice when setting the price initially, they probably assumed you had a reason for setting that listing price. So, at one point they trusted you. You now need to show them data that indicates how much the market has fallen since you agreed on the original price.

I find that a lot of Realtors are agreeing to list homes at price points where they are unlikely to sell. Once you set the ceiling, it is a lot harder to bring the price down to market.
0 votes Thank Flag Link Mon Nov 10, 2008
Explain to your sellers that the house has to appraise by the bank. An appraiser can only go back in time approximately 6 months. If the house doesn't appraise, the buyers will not get their mortgage. Unfortunately, that is happening more and more. Good luck.
0 votes Thank Flag Link Mon Nov 10, 2008
Showing my clients weekly reports of homes that have sold.Homes that are still sitting and homes that expired.In black and white it's not my opinion that they are basing selling their home on it is facts.First and foremost right now I ask them do they want it to sit?or sell? If they want to "wait" things out then I try to let them see this is NOT the time for this homes are selling..people are buying..people are just buying very educated these days with the internet an knowledge available people are smart shoppers..be a smart seller with facts not emotion and your home will sell.
0 votes Thank Flag Link Mon Nov 10, 2008
Remind your sellers that they get to determine not how much the house sells for (the market does that) but how long the house remains on the market. Tell them that at their price the house is estimated to remain on the market for X months, at another price for y months, and another price for z months.
I'd put it like this: "There's a one-day price, a one-week price, a one-month price, a one-year price, and a one-decade price. Where do you want your price to be?"
There are houses in my market which have an "infinite time" price. That is, not inthe forseeable future.
After all, the prices of 2006 were part of a muti-trillion dollar, worldwide Ponzi scheme and not real, anyway.
0 votes Thank Flag Link Mon Nov 10, 2008
Basically at this point you need to ask them if they are serious about selling? If they are serious about selling, they need to price the property correctly in order for it to sell. If they have all of the time in the world, maybe they should take it off the market and wait a few years to see how things pan out. (of course I am joking about them waiting a few years but maybe that is how you should put it to them). The market predicts the price not the seller. If they have received low ball offers and haven't countered they are missing out on a sale. Good luck!
0 votes Thank Flag Link Mon Nov 10, 2008
Gary,
One of the things that may be necessary is a complete evaluation of the market. Tracking absorption rate (new listings, current inventory against sales) by price range is a great visual for sellers. If you have a 25- month supply of inventory in the price point they are current ly in and there is a 6 month supply in the price point right below them, it could be compelling enough for them to make the reduction. Also, if you have some type of email subscription service that sends new listings, and reduced listings in your market, it may be more real to them to see that their comps are moving below them. This is a easy way to deliver the hard news that they need to reduce. I would also follow the original comps you gave them, as they most likely, have been reduced. Hope this helps. Melissa Riley
Web Reference: http://www.InkToLinks.com
0 votes Thank Flag Link Thu Nov 6, 2008
Price it correctly and effectively the first time. Lesson Learned. This way you'll have a record to show sellers that you've been 100% sale to list price ratio and you will not have to stumble when explaining your pricing methods with your next pair of sellers.
0 votes Thank Flag Link Thu Nov 6, 2008
Hello Gary,
I have to agree with Jessica, Gary Kellers new book SHIFT "How Top Real Estate Agents Tackle Tough Times” has a lot of useful information. I saw him recently at a seminar in Waltham, Massachusetts and I must say it was worth taking the day off.

Anytime you want to borrow that book, please call or email me. Hope you and Colleen are doing great!

Sandra
Keller Williams Realty
0 votes Thank Flag Link Thu Nov 6, 2008
I will tell you this... get your hands on Gary Keller's new book SHIFT "How Top Real Estate Agents Tackle Tough Times” When I began reading the book... I read it straight through it was that good. There is a lot of detail on this topic that is incredibly helpful. Take a look and let me know what you think! I was pumped up to see the potential in growing my market share in a shifting market. The brilliant thing is that there are only a few options that work and I don't have to re-invent the wheel. Feel free to contact me, I love to bounce ideas. One of the things I love to do is price for multiple offers and negotiate up! I love it when the seller gives this thought. It works every time, but you really have to know the specific market area well.

Contact me anytime.

Kind Regards,

Jessica Winski
Keller Williams, Conroe, TX
jessicawinski@kw.com
0 votes Thank Flag Link Thu Nov 6, 2008
Even with all the comparable sales and active listings in front of them, some sellers are not in a situation to be able to lower their asking prices because they are upside down in their mortgage but are trying to protect their finances and avoid a short sale that would require they bring more money to the table than they have available.

In these cases, Realtor need to discuss alternatives with sellers. It is now sometimes possible for them to re-negotiate their loan down to a very low percentage rate ( I have heard as low as 3%) and possible interest only payments for a number of years. This is helpful in case they really do want to stay in the house and could do so if the payment was reasonable. Granted, this is not going to be profitable for the Realtor -- but be assured that "sellers" we have worked with are someday going to be future customers who know that we will leave no stone unturned to assist them with their best interests as the priority.

Another alternative we have found effective for sellers who have been transferred to another area or who purchased during pre-construction in hopes of flipping for a profit, is to lease the home, often with an option to purchase. The typical potential "buyer" needs to lease for a while until they sell another home in a distant area. Other tenants may become first time home buyers when they save enough money to accumulate a down payment. As Realtors, we can also help these first time home buyers with information about the new government program that offers up to $7500 tax credit to help them buy a home. This offer will expire next summer, however, so having this information now helps them to set a goal to be a buyer this spring or early summer 2009.

Hope these suggestions generate some other ideas for Realtors to share about helping sellers achieve their goals.
0 votes Thank Flag Link Tue Oct 21, 2008
Hi Gary,

Not sure why Melissa put the word strategy in quotes, since a plan to succeed is a strategy, but otherwise I am in general agreement with her. If you still have the original comps and the price history, compare what has happened to your listing. Your comment "again" sounds like they have already done a price change...was it enough? If it wasn't a deep enough drop, they could be dropping their price but still be staying above the market value.

If you believe the property is priced within the range for sale, not just in the range with other properties that aren't selling, maybe try some buyer incentives. If the property is priced at $539,000 or less, a qualified buyer with only 3% down can get an FHA loan. Try putting together a plan with a trusted mortgage agent who is approved to do FHA loans...or pay closing costs.

At this time of year a seller really needs to decide if they really want to sell, and if so they need to do what needs to be done.

Best of luck to you!

Julie Duncan
RE/MAX Landmark
0 votes Thank Flag Link Tue Oct 21, 2008
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