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5 Ways to Recommend Price Reductions to Sellers

5 Ways to Recommend Price Reductions to Sellers

5 Ways to Recommend Price Reductions to SellersI have found recently that one of the hardest recommendations for a Realtor to suggest to his seller is to do a price reduction.  There can be a lot of resistance as it is an emotional timeframe for the person trying to sell their property.  I compiled a 5 point list below to help take some of the emotion out of the equation. 

The list can be helpful for a seller who is evaluating his position with his own home or a Realtor who is staying in contact with his seller making recommendations.  Also, it is a good idea to go over this list at the initial listing presentation so there is a strategy in place from the beginning.  I believe price reductions are a critical part of any listing strategy in this marketplace.

 

 

1.  Days on Market (DOM) - A seller should consider price reductions at least every 30 days on the market.  In the current market environment, I would also suggest to reassess every 2 or 3 weeks.

2.  Number of Showings - Another strategy is for a seller to consider doing a price reduction after a certain amount of showings.  My initial suggestion is 10 showings.  The theory here is that after those showings the buyer pool may start to run dry so a lower price will keep the traffic coming.

3.  Feedback from Showing Agents - If every agent that comes in provides feedback of "priced too high" than that is a signal to do a price reduction.  I really love using eshowings seller reports which I email to the sellers once a week or even daily if they request it.  These reports track the number of showings and feedback that includes pricing, how did it show, and if there was interest.

4.  Recent Market Activity - Since the property was listed, if there has been new competition that has come on the market at lower prices, than it is time to be more competitive.  Or if some of the recent homes have recently settled those numbers should be evaluated to determine and adjust the pricing of the home.  As a listing agent, it is critical to track the recent activity around your listings to communicate these facts to your seller.  This is great information to use for a client service call.

5.  Stigma / External Factor / Personal / Other - Any other factor that relates to the sellers goals needs to be taken into account.  If there are personal reasons that the house needs to sell faster, than it is time to lower it.  Maybe the seller is trying to buy a house on the other end and needs to sell his first ?  Well then it is time to be more aggressive.  In regards to "other", there are some blocks in Philadelphia that can get really loud in the summer.  That being said, I would be more aggressive now with the pricing than taking the risk that the house still has not sold by June.

What are other ways that you use to recommend price reductions for your listings ?

The Somers - Chris and Stephanie Somers

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Comments

Good recommendations..I'm on board with you!

Posted by Dorie Dillard, Realtor-Canyon Creek- NW, Austin TX Homes For Sale (Coldwell Banker United Realtors) over 5 years ago

My favorite. ..let's make a tour of the competition and PRETEND YOU ARE BUYERS! (preview these homes before or it could backfire) then ask them. . . 

If you were buying, what house would you considered to be the BEST VALUE? 

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) over 5 years ago

Staying in tune with what is happening in the market is one of the most important things we can do for our clients. Since price is the most important factor is making any product move you better make sure you get it right and correct it quickly if you don't.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) over 5 years ago

Dorie - Thank you !  I hope those recommendations help you.

Fernando - That is certainly a great strategy.   It really helps put it into perspective for the sellers instead of just seeing the date on paper.

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

As our market declined about 10 percent in price last year . On e of my agents has used the stragegy of saying hey prices shrunk 10 percent. Here is your house price today. It takes 6 months to sell in this market lets reduce this price by 5 opercent. That seems to be working and avoiding the price reduction talk later

Posted by Charlie Ragonesi, Homes - Big Canoe, Jasper, North Georgia Pros (AllMountainRealty.com) over 5 years ago

Yes and it is so hard for some to equate that the longer it is on the market and the longer they make payments that the value on there return is going down.

Posted by Treva Fox-Christy (GOLDEN DOOR REALTY) over 5 years ago

I do not believe in price reductions. WHY NOT price it competently when you get the listing?

 

Posted by Anne Hensel, Realtor - Broker - St. Pete Beach, Treasure Island (South Beaches Real Estate Professionals) over 5 years ago

I agree with Anne, if you price competently in the first place, you should not have to do price reductions.  The only time that I will do price reductions is when the seller and I cannot come to terms on what the value of the home is.  If they are very adamant about the price and it is higher than I think will sell, I will give them all of the pitfalls that we will look for if we use their price (a list similar to the one given in the blog).  I also have them sign upfront price reductions that we will incorporate every week until we get the traffic and feedback that we need to get the house sold.  If they are not willing to compromise and do this, I don't take the listing.  Taking an over priced listing only leads to an angry seller and a damaged relationship. 

Posted by Cherry Wings Realty, Your Traverse City Michigan Realtor (Cherry Wings Realty) over 5 years ago

I have a search set up in my MLS for each listing.  It gives me a good market update for the seller that I send weekly.  After a while, the price reduction will become obvious and more often than not, they suggest it.  If not, I show them what they should have been seeing.

Posted by Gabe Sanders, Stuart Florida Real Estate (the BlueWater Realty team specializing in Martin County Residential Homes, Condos and Land Sales) over 5 years ago

Great suggestions.  In the changing market, sellers need to be prepared to change with it. 

Posted by Jen Anderson (Exit By the Bay Realty) over 5 years ago

Bill - You got that right !  So true.  The key is to have it priced right in the beginning.  But if it was priced a little high or a lot high, it is important to make quick movements and adjustments based on new market updates, both new listings (competition) or properties that have recently settled. 

Charlie - Good strategy !  In a declining market, there is a lot of risk to those sellers that hold out for higher prices.

 

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

Chris - Great list post! Since this market is ever changing it's great advice to reassess every 2-3 weeks.

Posted by Maria Mastrolonardo, Realtor, Naperville, IL Real Estate (RE/MAX of Naperville) over 5 years ago

I use to do the 10 Showings, no offer, reduce the price.

Now we are doing 5 showings...it is just do important to price it for a sale right now.

Some sellers listen and some don't so those that do reduce. Those homes sell when we hit the sweet spot.

Posted by Missy Caulk, Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) over 5 years ago

It can't be an easy thing to do.  However, the market dictates sometimes that it must be done.  I'm dealing with one client whose house is on the market and I gave them a pre-approval to buy another home, not contingent on their current house selling.  Then again, we discussed them not wanting to be obligated to two mortgages for an unknown length of time.  They have reduced the price on the home they are selling three times now.  Hopefully, the third is a charm.

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 5 years ago

Chris - I like the idea of making this list part of a listing presentation.  Giving the client the facts up front before they're upset that the house isn't selling and therefore emotionally conflicted as to what to do is a great idea.

Posted by Matt Stigliano (Kimberly Howell Properties (210) 646-HOME) over 5 years ago

Hey there, this is sometimes so tough for a seller. You have some very good ideas and I especially like the re-assesing every few weeks. The longer it sits on the market, the more it is costing the seller.

Posted by Cristal Drake, Realtor - Fullerton Real Estate (Prudential California Realty) over 5 years ago

Treva - Good point.  Communication between agent and seller is critical to drive the points home.

Anne - Obviously a competitive listing price will not need price reductions.  Often times many of our listings did not need a price reduction which is great.  But often times as well, that is just not the case.  I have sold countless properties after a price reduction and it is more and more common that that is what is necessary before properties go under contract.  I just do not know how realistic that is to sell every listing without doing price reductions.  I would be very impressed with an agent who has that track record.

Christine - Excellent point.  I really like the strategy of having agreed price reductions in the very beginning of a listing agreement.  That takes away the emotion of trying to get it later on down the line.  Also agree that a listing that does not sell takes the risk of a damaged relationship.  So pricing a listing properly is the most important step.  However, after that, communication is vital to help get the listing sold to have the relationship flourish which may indeed include getting those reductions agreed upon.

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

Gabe - That is a great strategy.  I think the key here is providing that client service and expertise by communicating themost recent market information during the listing time-frame, whether a price recommendation is made or not. 

Jen - That is the key !  To be able to change and to adjust when necessary.  It is vital for the listing agent to make professional recommendations based on those changes.

Maria - Agreed !  Reassessing every 2 to 3 weeks makes the most sense in this marketplace.

Missy - Thanks for your insight !  I like the 5 showing approach you are taking versus 10.  The quicker the adjustments, the better chance and likelihood that the houses says by "hitting that sweet spot" as you say.

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

You've guys have covered every possible legitimate basis for a price improvement. How could anyone object? Great job and solid advice.

Posted by Amber Noble Garland, CEO & Team Leader of A NOBLE HOME TEAM, and COO of The Egypt Sherrod Real Estate Group (Strategic Marketing Expert & Relocation Specialist in NJ, GA and nationwide!) over 5 years ago

Christopher and Stephanie:

I also use the current sales to access value ratio. Take the last sales and the access values for those properties. Then I would apply the same process of access value of the subject property to the ratio and get a projected sales value. This with an explanation of the assessor's process to establish equality in their valuation model, people can see where they stand from another view point.

I was in Phila today for about an hour. I was with my wife and my youngest and her friends at the aquarium. We ran into Philly for Pat the Steak King and Gino's. Yes, for cheese steaks!

Richard

Posted by Richard Stabile, Bergen County New Homes Builder Realtor (REMAX real estate associates) over 5 years ago

Great post Chris and Stephanie! I particularly like that you pointed out setting expectations upfront when listing the home. When a buyer knows it's coming, it's a lot easier to accept, and they tend to be more open minded. I'm so glad I subscribed to your blog. I bet everyone who comes here clicks that little gray arrow over there on the right hand side of the page and subscribes to your blog. :)

Posted by Tim White (Coldwell Banker Woodland Schmidt - Hart, MI) over 5 years ago

Jason - Sometimes the third time is a charm !  It is tough out there and sometimes it takes a number of price reductions to get to the point of where it should be.  Sometimes it is not an exact science for unique properties to many folks want to start a little higher "just in case".  Or perhaps their motivation gets greater as the weeks and months go by, then they lower it to get it sold when they are ready.  Good luck with this specific client and if you could, keep us posted on the outcome !

Matt- Agreed.  I think formulating a basis for price reductions in the beginning is critical to come up with that overall strategy.   And at least it is not a surprise a few weeks later when I call to make the suggestion since we already spoke about it.  This is a lot different than the agent who overprices the price in the beginning buy "buying the listing" and throwing the seller a curve ball a month later that was unexpected.

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

Sean - Thanks !  It is a tough conversation.  Often times, without price reductions, these listings will not sell and they will eventually fall into the withdrawn or expired category.  Then a new Realtor will come in and list the property at a lower price.

Cristal - So true.  You are right reassessing and communicating with the seller is critical.  Otherwise, if they do not get a call they are wondering what their agent is doing...

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

Why not consider offering your Sellers another OPTION?

Reducing the price is the EASIEST option but not necessarily the MOST effective way to help a Seller expand his/her pool of qualified buyers. Motivated Sellers need to increase affordability in order to make their home stand out and gain a competitive edge in today's market.

When a Seller lowers his price by $15,000 it lowers a potential Buyer's monthly payment by about $80. That doesn't increase market potential by very much. Agreed?

If the Seller offers instead to take that same $15,000 to discount the Buyer's rate and  payment for the first few years, the potential Buyer's initial monthly payment would be reduced by $600.

Now that's a substantial amount of money! Let's see $80 or $600 ??? It's a "NO-Brainer"!

The benefits for Sellers & Buyers are amazing... including tax benefits for both parties! Win! Win!

We are looking to launch our service in the Philly area...if you are an aggressive Realtor who believes that NOW is the time to become Proactive, part of the Solution and you are willing to think outside the box... we are looking for 321Affiliate Members in the Philly area. We offer volume discounts for our affiliate members. If you are interested, please visit our site and please e-mail me at BQF@321advantage.com.

Thank you for your consideration! Barbara Q.

Posted by Barbara Q. over 5 years ago

Amber - Thanks !!! Getting the price reductions sometimes are never easy though.  At least when it is communicated this way, they can come a little easier.

Richard - I like that methodology as well !  Hope you enjoyed those famous cheesesteaks today !

Tim - Wow !  Thanks for the compliment and subscribing to our blog !  You just made my day !  Yes, communication with your seller client is the most important piece to the puzzle.

Barbara Q - I agree that a seller paying for closing costs which would include paying points to buy down the mortgage is not a bad idea.  Still those amounts are financed and built into the sales price.  Many buyers just want to have a good cost basis for the future so they will have potential built-in equity off the bat or more equity appreciation if they do not need the help of sellers assist.  You make a good point though for specific buyers.

 

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) over 5 years ago

Great Post-Stephanie and Chris, Thanks for sharing it with us.

Posted by Joseph D. Federico, Eastern Massachusetts Real Estate (Donahue Real Estate Co.) over 5 years ago

Participate