READ THIS Before Your Next Price Reduction Recommendation!

By
Education & Training with Sell with Soul

Why?

I have a friend who listed her house with one of the top agents in her area. They went on the market about two months ago, at the exact price the agent recommended and supported with his market analysis. Showings were brisk at first, then trickled off, as typically happens. Feedback has been generally positive, although the home is rather unique and simply not practical for many buyers, and the feedback has reflected that.

A few weeks ago, out of the blue, the agent recommended a $50,000 price reduction. This caught my seller friend by surprise since the feedback she'd received never mentioned that pricing was an issue; most of the negative feedback centered on the unique features of the home that made it "not work" for the buyer. But no one, to her knowledge, had mentioned price as an obstacle. My friend asked the agent for an explanation of his recommendation, but no explanation cometh, the agent simply reiterated his recommendation that she reduce her price.

My friend came to me for advice. I suggested she ask him the following questions as to the WHY of his recommendation:

  1. Has there been consistent feedback that we are overpriced? (If so, it has not been shared with us.) 
  2. How is the overall market right now? Is anything in our price range selling? Is the market typically slower this time of year?
  3. If the market is not interested in our home at the current price, would your recommended price reduction change that? 
  4. Will reducing the price by $50,000 overcome buyer's objections to the unique character of the home, or will buyers still expect a more traditional home?
  5. Are homes in your recommended price range getting more activity than homes in our current range?

and the kicker...

6. Has the market changed significantly since you recommended the price we listed at? 

My friend is not categorically opposed to reducing her price if that's the right answer, or to withdraw the home from the market and wait for a better time to sell. But she wants (and deserves) information. A coherent explanation. Some evidence that her agent (who is supposed to be looking out for her best interests) put a little effort and thought into her situation -- and his recommendation.

Contrary to what we like to believe, our sellers are not stupid and they aren't unreasonably stubborn. But when we recommend a list price, back it up with data, and then, like clockwork, push for a reduction to that price six weeks later without explanation or exploration of other solutions, home-sellers have every right to be frustrated with us and to question our credibility. To doubt our commitment to their best interests. Or perhaps, to reach the conclusion that we're just lazy.

(My friend is thinking all these things about her agent and I can't blame her).

The moral of the story... before you recommend a price reduction, make sure you have answers to all the questions YOU would ask if it were YOUR home on the market and your agent advised you to give up a chunk of your equity. DO your homework, not just to pacify the seller, but also to determine if, indeed, a price reduction is the right solution. Maybe it is, maybe it's not. But be a PROFESSIONAL real estate agent and find out.

Oh, and it wouldn't hurt to price it right in the first place.

RELATED BLOGS
When Your Listing Isn't Selling, What's the First Thing to Fix - All together now...
STOP! Before You Reduce the Price!
If Price is All That Matters, What Do They Need Us For?

 

 

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Re-Blogged 15 times:

Re-Blogged By Re-Blogged At
  1. Mike Cooper 10/21/2011 01:45 AM
  2. Broker Nick 10/21/2011 03:04 AM
  3. Alan Brown 10/21/2011 03:35 AM
  4. Gregory Bain 10/21/2011 06:20 AM
  5. Mike Warfel 10/21/2011 07:02 AM
  6. Lenn Harley 10/21/2011 08:02 AM
  7. Randal Jenkins 10/22/2011 02:19 AM
  8. Dana Smithers 10/22/2011 09:28 AM
  9. Gene Riemenschneider 10/23/2011 12:01 PM
  10. Brenda Hughes 10/24/2011 06:05 AM
  11. Yvonne Burdette-Van Camp 10/30/2011 07:04 AM
  12. Fred Griffin 11/04/2011 04:04 PM
  13. Luis Iniguez 11/21/2011 02:39 PM
  14. Monica K. Pindle 09/24/2012 10:07 AM
  15. Praful Thakkar 07/26/2017 01:10 PM
Topic:
Real Estate Sales and Marketing
Groups:
Real Estate Rookie
Learn to be a Top Producing Listing Agent
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The Ninety-ninth Percentile
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Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Thanks for the reblog, Brenda and I agree with you 100%. I used to own a home staging company, so "selling" staging was never a problem for me - in fact, in my last full year of selling real estate 2008-2009, every single one of my listings hired my stager (and paid for it). If you have a great stager and you believe in staging, it's very easy to bring a seller on board.

Jayson - it's definitely not a $1M+ property and the $50k adjustment would have been a significant one - more in the 10-15% range...

Oct 24, 2011 10:12 AM #156
Rainer
58,988
Scot Draper
RE/MAX Executive Realty - Charlotte, NC
Broker/Realtor, ABR CDPE CIAS

Great post. I agree, the listing agent should certainly have comps ready to justify a price reduction. Never blind side the seller.

Oct 24, 2011 10:20 AM #157
Rainmaker
205,354
Patrizia "Trish" Giassa
Keller Williams Realty, North Central New Jersey - Chatham, NJ
The Shannon Aronson Group

Such a great post Jennifer.  I agree that if your friend's agent did not provide any background information, then he may well be lazy. Or a bad communicator.

Unfortunately, I have a listing right now that both I and the seller felt was priced very competitively 2 months ago.  All the agents said "what a great house - good price!" and buyers feedback never included comments on pricing.  Yet, this property as beautiful as it is, has a couple of, shall we say, peculiarities, that limit the buyer pool interested in this home.  And here's the thing:  the more buyers you have for something, the more it's worth.  The fewer buyers, the less it's worth.  It's the law of supply and demand. 

If the buyers at that price point are essentially rejecting the house, the only real option is to open up the buyer pool by adjusting the price - because we're not likely to "fix" the peculiarities or uniqueness any other way.

It's too bad your friends agent did such a poor job of working through this with the seller.  I did communicate all this, and the fact that other homes in the price range were selling, there were buyers in the market (including solid relocation buyers), and that we needed to reposition to meet buyers' expectations, which are very exacting to be sure.

Good luck to your friend.  I hope it works out well for her.

Oct 24, 2011 03:13 PM #158
Rainmaker
1,033,759
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Your words of wisdom to your friend were right on target. As Realtors, we have many tools at our fingertips to analyze the market.  The resulting reports are essential to helping our clients understand the current market.

Oct 24, 2011 05:59 PM #159
Anonymous
dale taylor

good advice

Oct 25, 2011 06:46 PM #160
Rainmaker
437,566
Dianne Goode
Raleigh Cary Realty - Raleigh, NC
Realtor/Broker

FWIW, I find that agents rarely give feedback that the price is too high.  The few times I've said that in feedback -- thinking to help the listing agent get the seller to see reason -- I've gotten back defensive responses trying to justify the price, as if I'd attacked the listing agent's judgement when I didn't mean that at all.  So now, like everyone else, I just say "Unfortunately, the [whatever] doesn't work for these buyers" and we move on.  

"The price is too high" is in the feedback by implication, but not in so many words.

Oct 27, 2011 06:00 AM #161
Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Dianne & others who commented that "it doesn't work for my buyer" = "it's overpriced." I've been thinking about this and I'm not sure I agree with this as a general rule. We all show homes to buyers that simply don't work for them, although they may have appeared to be a good fit on paper. But that home MAY work great for another buyer - and it's not as if by simply pricing a home right, every buyer who walks into it will buy it, right?

I also wonder at the assumption we jump to that "specific objections are just code for overpriced" - that when an agent provides non-price-related feedback, they're really saying that, indeed, PRICE is the issue. Do we KNOW that or do we just tell ourselves that so that we don't have to dig deeper? I've shown plenty of houses that my buyers didn't write on and I didn't provide feedback that the pricing was off because even at a lower price, the house would not have worked for my buyer. 

Am I making sense here with my ramblings?

Oct 28, 2011 06:52 AM #162
Rainmaker
216,828
Judy Orr
HomeSmart Realty Group - Orland Park, IL
SW & Near West Chicago suburbs

Jennifer, I think the bottom line is that if there are enough showings and no offers, no matter what the specific feedback is, generally speaking price should be taken into consideration to open the buyer pool.  It might not be all about price with some unique homes, but even with that, maybe lowering price will make the next buyer accept that unique feature, which the buyers at the current price point will not.  If the seller can't reduce price or gets to their bottom line of pricing, then their choice is to wait or take the home off the market, especially in this market where most areas have way too much inventory vs. ready, willing and able (and super-picky-because- they-can-be) buyers. 

I just showed a charming and very unique home that intrigued my buyers but I think at the listed price they found fault with the floorplan.  They want charming and unique, they lingered at the house, they loved some features of it like the awesome kitchen.  Would they have accepted the bad features at a lower price - maybe - we'll see if it drops and if they reconsider.  As it was, at the current price they nixed it and will continue looking.  My feedback didn't mention price, I only said it was charming and unique but my buyers didn't care for the floorplan.  I don't mention price unless a home is grossly overpriced and I know there's no way my buyers would consider it.

Oct 28, 2011 08:50 AM #163
Rainmaker
711,563
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Jennifer - You need to have a valid reason to lower the price and it can't look like you are just rying to get a fast sale.

Oct 28, 2011 03:14 PM #164
Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Judy - Appreciate your thoughts! I agree 100% that the price must be considered and it may very well be the primary obstacle to sale. But to lead with that as the only solution without an explanation that satisfies the seller just isn't going to sit right with that seller. I know it wouldn't sit right with ME if my real estate agent just pushed a price reduction amendment in my face as his only suggestion!

RM - EXACTLY!!!

Oct 29, 2011 01:16 AM #165
Rainmaker
216,828
Judy Orr
HomeSmart Realty Group - Orland Park, IL
SW & Near West Chicago suburbs

Jennifer, I agree with the fact that being asked to make a substantial price reduction without supporting data or an explanation is not adequate and I mentioned that fact in my prior comment.  My last comment was in response to your comment #163.  I think we're pretty much in agreement.

Oct 29, 2011 03:56 AM #166
Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Judy - yep - sorry if I implied I was disagreeing with you... I wasn't at all. ;-]

Oct 29, 2011 03:59 AM #167
Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Here's a follow-up blog about HOW to recommend a price reduction IF that's really the right thing to do!

http://activerain.com/blogsview/2568348/how-to-recommend-a-price-reduction-without-risking-your-credibility-or-upsetting-your-seller

Nov 01, 2011 04:18 AM #168
Rainer
11,948
Robert Adams
Keller Williams Realty, South Tampa - Tampa, FL

I agree whole heartily on having comps and information to support the price.  Some of what should be talked about has to do with the supply and demand per price point for her character of house within that neighborhood. A simple analysis of the last 6 month's sold information by increments of $10,000 or so as one column, the pending and active market as two more columns, then the time to sell the inventory at each price point would be a useful piece of information in her case. 

Nov 01, 2011 11:32 PM #169
Rainmaker
774,827
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Jennifer.  Just had to go read the other blog on price reduction.  Thanks!

Nov 02, 2011 11:21 PM #170
Ambassador
3,577,260
Praful Thakkar
eXp Realty - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Bookmarked it. In fact, very timely one. I have a meeting with a seller who needs...what else? Price reduction!

Nov 04, 2011 04:43 PM #171
Rainer
135,576
Matt Robinson
Professional Investors Guild - Pensacola, FL
www.professionalinvestorsguild.com

Stupendous information, and great recommendations.  Some agent's only strategy to refresh a listing is to drop the price, but that's not always what is needed.  I'm assuming that since he was asking for a $50k price reduction that it's in a high price range, and if it's a unique house, I think 6 weeks is way to early to start cutting the price.  It's probably just one of those houses that needs to wait for the right buyer.  This is an older post, so hopefully she worked it out, and it's already sold.

Mar 29, 2012 09:44 AM #172
Rainmaker
515,339
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Your question for the agent no. 6 on changing list price is good that "Has the market changed significantly since you recommended the price we listed at?"

However, a reasonable response would be complicated.  Market changes happen, and this impacts reasons for buyers presenting an offer at any price.  Market changes are usually not the most important reason to need a list price reduction. 

Aug 01, 2014 03:44 AM #173
Rainer
8,357
Janie Lapka
Baxter, MN
Realtor, real estate sales, Broker Associate, CRS

I just created a post about "functional obsolesence" and how it effects price.  I have a listing right now that has this because of the 'closed floor plan'.  It was appraised at $199,900 before I got it listed so I felt I had to list it at that but there was no showings at all so I finally got the seller to reduce to $179,900 and we finally have a few showings but people aren't liking it because of the closed up floor plan and it's also odd. This is what I would call "functional obsolensence" wouldn't you?  It's very difficult because I feel like I am insulting the seller about this but I have already presented my view via email.  One agent thought it should be listed at $149,900 and I'm afraid that I agree. I find it difficult to ask for that much of a price reduction because I feel like I am insulting the sellers.  Has anyone else had experience with this and if so, how do you convey this to the sellers?  

Sep 17, 2014 02:02 AM #174
Rainmaker
482,973
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Ugh - I hate it when that happens, Janie!

Not that I was perfect but how I would try to handle a situation like this is to take the "blame" for being wrong on the price. That I'd hoped the market would overlook the functional obsolence (smoke smell, busy street, whatever) but unfortunately I was wrong. "I know you're disappointed, and so am I, but here's what I think we'll need to do..."

Always use "we" "our" and "let's" as if it's "our" problem to solve - which it is. 

Sep 17, 2014 11:40 PM #175
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Author of Sell with Soul
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