So let’s say you took an overpriced listing. No shame in that. It happens. The question is — what are you going to do about it now?
Here’s what most agents do. They’ll wait a month or two, then call the sellers and tell them it’s time to do a “price improvement” or a “price adjustment.”
First of all, can we just call it what it is: a “price reduction?”
I mean, seriously — price improvement? Price adjustment? Who talks like that? What, you think the seller is going to feel better about dropping the price because you came up with some euphemism?
Trust me — the clients saw through your clever little ruse. They know you’re trying to get them to drop their price. Try to use normal English when talking to all the other humans.
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Here’s the problem most agents have with getting price reductions: they don’t earn it. They think that the need for a price reduction is evident just from the fact that the house didn’t sell.
So they pick up the phone and say something like: “We haven’t gotten any showings!”
To the seller, that’s just evidence that the agent isn’t all that good at marketing the home.
“We’re not getting any offers!” See above.
“Look at all the showing feedback we’re getting!” If sellers don’t trust the agent’s advice on the price, why would they trust a bunch of agents they don’t know?
That’s not going to work. Why? Because those agents haven’t earned the right to ask for that price reduction.
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How do you earn it?
1. Start at the appointment
You have to start prepping sellers for the price reduction the moment you realize that they’re going to overprice the home. Something like this:
“OK, you’re the client. It’s your call. And I’m going to do everything I can to get it sold at that price.
“But if we’re going to do that, I need your commitment that if we find that we’ve overshot the market, that we’ll take a look at the price in about a month or two. OK?”
And get that commitment. Commitments, particularly if they’re written down, are powerfully persuasive. You’re much more likely to get that price reduction if you primed the pump at the initial appointment.
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And it doesn’t hurt to get something in writing that confirms that the sellers went against your advice, so they don’t turn around in a month and blame you for overpricing the home.
2. Be great at your job
It’s amazing how often “be great at your job” comes up in my advice to agents. Yeah, you need to be great at your job of marketing, staging and servicing that listing. No mistakes.
You don’t want the sellers to have an easy out by giving them any reason to blame you and your marketing plan. And who knows, maybe you’ll do such a great job that the house will sell at the ridiculous price. That would be kind of amazing.
3. Make an appointment
You should be meeting with your seller regularly, regardless of pricing issues. But if you need to do a price reduction, then you shouldn’t do it over the phone. That’s just lazy.
Schedule an appointment to sit down with the seller to give an overview of what’s happening with the listing: a review of the marketing, a discussion of the feedback and an updated analysis of the market.
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4. Do a new CMA
I’m amazed that agents don’t do follow-up CMAs for their sellers, particularly the overpriced ones. The market does change, and that CMA you did three months ago when you got the listing is out-of-date.
Think of it this way. Back when you took the listing, you thought the client’s pricing was too aggressive.
Now, hopefully, you have evidence that you were right. You need to show your sellers that evidence: new listings that are priced more attractively and comparable sales that closed at more reasonable prices.
5. Track the buyers
But the very best evidence you can give at that appointment is this: “These people saw your house, and then bought this other one. Here’s why.”
In other words, if you want to earn that price reduction, you need to show the sellers that people who saw their home chose to buy something else instead, and then show why those buyers found the other properties a better value.
So track those buyers who come through your listing, and keep in touch with what happens to them. And if they buy something else, use that as your best evidence to get a price reduction.
Why is this important? Because sometimes, particularly with high-end or quirky properties, the sellers can argue that it’s not the price, it’s just that nothing like their home is selling.
If you can show them that buyers saw their home, passed on it and then bought something else, you can demonstrate that the home does have comps, and those comps are selling.
Of course, the problem with this approach is that you need time to lose those buyers and gather that evidence. But assuming that you’ve taken the listing for an extended period, time is on your side.
Why? Because living in a home for sale is a terrible experience.
It’s like living in a friend’s house, a weird friend who is anal-retentive about you keeping the place clean — and even worse, this person constantly invites people you don’t know over, who hang out and make snarky comments about the decor.
After a few months of that, your sellers will be fed up enough to listen to reason.
So if you are forced to take an overpriced listing, then take your time, gather your evidence, make your case and earn that price reduction.
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Read “Pricing mistake No. 1: Asking sellers what the home should go for,” “Pricing mistake No. 2: Telling rather than showing,” “Pricing mistake No. 3: Emphasizing unsold properties” and “Pricing mistake No. 4: Being ashamed of taking an overpriced listing.“
Joseph Rand is one of the managing partners of Better Homes and Gardens Real Estate – Rand Realty in New York and New Jersey and blogs about his local markets at the Rand Country Blog and about the industry at ClientOrientedRealEstate.com.