Editor’s note: In this three-part series, brokers and agents share tips and insight on approaching buyer and seller standoffs and ways professionals can keep a transaction moving in a slowing real estate market. (Read Part 1 and Part 3.)
A rise in for-sale property inventory has halted or slowed housing-price appreciation in many markets, and sent prices down in others.
But analysts say home sellers are often slow to make price adjustments in a down market, clinging to overoptimistic estimations of a property’s worth.
Sellers who are under pressure to unload property are willing to make adjustments, but those who can afford to ride out the downturn may stick with their asking price, even if they aren’t getting any offers.
The tendency of prices to be “sticky” in a down market can create headaches for real estate agents and brokers, who can find it challenging to get sellers to set a realistic price when listing, or make downward adjustments when that’s what the market dictates.
Some professionals who shared their insight with Inman News say there are tricks to getting sellers to play ball. Many say that if sellers won’t get real about pricing, it’s best to send them packing.
A seller with unrealistic price expectations and a weak Realtor is “a recipe for disappointment and disaster,” said Stephen B. McWilliam, president of Florida State Realty Group Inc. in Ft. Lauderdale, Fla.
“The weak Realtors in desperation, in order to obtain the listing, will contract to list the property for the seller’s unrealistic price. When it does not sell, and in some cases it does not even get shown, they suggest lowering and lowering and lowering the price,” McWilliam said.
An experienced Realtor has the knowledge to assess the market and will provide a comprehensive comparative market analysis (CMA), which is the best gauge as to what price the house ultimately will sell, McWilliam said.
“We present these numbers to the sellers and if they refuse and demand more money we simply suggest that they deal with another Realtor,” McWilliam said. “We want to sell their home — not just list it. You have to be able to walk away from these bad deals.”
Broker Christine Forgione of Carollo Real Estate in Queens, N.Y., said if she is listing a home that will require renovations, she’ll factor in the cost of work that buyers will need to have done when pricing the house. After holding an open house, she’ll use past sales from the MLS system and buyer feedback to decide if a seller needs to make a price adjustment.
“If my seller will not adjust the price — and I feel that I cannot sell it at that price, because honestly everything sells if it is priced right — then I will give back the listing,” Forgione said. “I cannot stress enough that taking an overpriced listing is like taking a car with no engine — it won’t go anywhere.”
Sheryl Vogel, a Rockland County, N.Y., broker, allows sellers to choose an asking price with her guidance.
“I let them know that they are the boss and they are in charge but I guide, counsel and give them professional advice on the market,” Vogel said.
Vogel uses a CMA that is built into her MLS system, reviewing the data herself. She can also refer her clients to a book she co-authored, “Get the Best Deal When Selling Your Home.”
“If they wish to ask higher than my suggested range, I will ask them to sign a letter stating that they have opted to start at a range that was not recommended by me, the professional,” Vogel said.
If a house has been listed for 21 days without any offers, Vogel said it’s time to reevaluate the asking price.
“If nobody is showing their home, that is an indication that the buyer pool and Realtor community have not accepted what they are offering,” Vogel said.
Every seller needs some prodding, she said — nobody wants to feel like they are losing money.
Vogel uses an automated notification system that notifies her clients immediately when a home that’s similar to theirs, is listed, adjusts in price, goes into contract, or closes.
That way, Vogel said, she is not the bearer of bad news.
“I have been finding that sellers actually like getting the data regularly,” she said. “They also like to know what is being done for them in the way of marketing.”
But McWilliam advises against allowing sellers to set an initial price that’s higher than the market will bear.
“Sellers ask us, ‘Can’t we just try it at this price? Can’t we at least test it?’ I tell them no, I am in the market every day. I know what it’s worth,” McWilliam said.
The problem with starting out with an inflated asking price as a starting point for negotiations is that some buyers who might be interested in the house will never bother to look at it, because they think it is out of their price range, McWilliam said. At the same time, the house will not compare favorably with homes in the same price range that have been truly valued.
“When you list a house that’s worth $300,000 for $325,000, the person who comes to look at it is comparing it to the really truly priced $325,000 house,” McWilliam said. “The people looking to buy a $300,000 home are not looking at yours because it’s too expensive. You’re being seen by the people that don’t want you, and the people that do want you aren’t seeing you because it’s not priced right.”
Once the house has been on the market for weeks, the seller may agree to lower the price — only to find that time is not all that’s been lost.
“When you’re on the market 60, 90 or 120 days and you start marking the price down, every buyer asks why has it been on the market so long? What’s wrong with it? ” McWilliam said. “We say nothing — it’s because it was priced too high. They say ‘Really? I wonder what the bottom is.'”
Some sellers will decide to wait until the market catches up with their asking price, and remove their homes from the market.
“When they want to sell, they’ll sell it,” McWilliam said. “When all that stuff shifts away, we’ll have true inventory — not just people that are going on a fishing expedition.”
Understanding a client’s motivations for selling is important in determining whether they can be persuaded to set a price that reflects the realities of the market.
“When you really consult with a seller instead of trying to sell them and you find out why they are really selling and if now is the best time, objections are easy to overcome,” said Marguerite Crespillo, the founder of Realty First Real Estate & Mortgage Services in Roseville, Calif.
Crespillo said home prices in the Roseville area have not really declined, they just haven’t appreciated as rapidly in recent years. Now, with many home builders and investors dropping their prices, there is an oversupply, Crespillo said.
Unrealistic sellers are often “part of the generation who has not seen a fluctuating market,” Crespillo said. “They have been able to move up a couple of times and put money in their pocket. It was easy and homes sold quickly, but that was not realistic.”
That makes pricing a home tricky, because “the comparables for the last three months are really irrelevant,” Crespillo said. “The price you put on a home has to assume a declining market and must be priced accordingly or everyone will be frustrated.”
Like sellers, many newer Realtors have only experienced good markets, and don’t know how to explain pricing in a down market, Crespillo said.
“When explained properly most sellers understand,” she said, but many Realtors have been taught to get a listing at any price to attract buyers. So, “they let the seller dictate the price instead of using their own knowledge and experience to guide them.”
The end result is often frustration all around, ending in an expired listing and the seller moving on to another Realtor who gives them better advice on asking price, Crespillo said.
“I think the reasons sellers are stubborn has more to do with the reason they are selling than the actual price,” Crespillo said. “If they still remain stubborn after all has been explained to them, then I simply tell them I am not the best Realtor for them and I would be happy to refer them out to someone else. I would rather bow out gracefully then be kicked out later for circumstances I cannot control.”
Morgan Hill, Calif.-based Realtor and broker Robert Whitelaw has similar views.
“I personally believe that the only time you lose in real estate is when life forces you to sell, such as death, divorce, job loss or job relocation,” Whitelaw said. “We have a whole generation of people who have not seen a challenging market. Meaning that those who entered the market in the last seven years have been able to purchase a home and sell it two years later for a substantial increase. This is not nor ever was realistic for any considerable period of time.”
Whitelaw said that if a client insists on an inflated asking price, he will first try to sway them with numbers, including comparable sales and local market analysis.
“If they continue to insist with the ‘We can always lower the price later’ argument, I will consider taking the listing, but only if they agree — in writing — to a schedule of price reductions over the course of the listing,” Whitelaw said.
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