Special offer

Why can’t we just lower the price later….???

By
Real Estate Agent with Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605

Price it rightMany sellers who are barely breaking even or are under water are desperate for every penny they can get out of their  home.  For many their home was their nest egg and now rising taxes and financial hardship are forcing them to sell at the depths of the biggest housing recession since the Great Depression.

The question goes something like this:

“We need to get “X” out of our home in order to move on with our lives.  You say it is worth 20% less.  Why can’t we try it at the price we need and if it doesn’t sell, lower the price in a couple of months?”

Right now, this is still a brutal market for many sellers.   Some areas have bottomed out – most are bottoming out – but quite a few markets aren’t there yet and buyers know this and are driving a hard bargain.

Overpriced listings don’t get showings  – or they get showings from buyers in the wrong price range.

A few weeks ago I set up some showings for a new buyer client.  There was a new house fresh on the MLS in the appropriate range with amenities that the buyers were looking for.  Since it was new to the MLS – I didn’t have time to preview it.  When we arrived, I realized that I made a mistake.   I don’t know how the listing agent came by that square footage, but the house was much smaller than I had anticipated.  The half-bath was actually in the unfinished basement and there was no bath on the ground floor.   A fine house – but not at that price and not for that buyer.

During the first couple of weeks of the listing – this scenario was probably repeated over and over again with this listing.

But won’t people just make low offers anyway?

Well – no – its not very likely.  Why would I bring a client with a price point that was $150,000 lower to a home listed at this price point?  Particularly if there is plenty of inventory in the appropriate price range.

After a couple of weeks the showings start to slow down…

The first two weeks of a listing are critical.  The listing is fresh on the market and it gets a lot of activity – then the activity slows down.

Why does that happen?  Because when a home is new on the market all the buyers that are currently looking in your price range tend to view the home.  That existing inventory of buyers represents people who may have been looking for months.  Once they have been through the home, the showings slow way down.  After two weeks the primary traffic through the home are from new buyers just entering the market.   Since they are new to the market, they are less likely to be pulling the trigger quickly.

The two charts below are courtesy of Keller Williams:
The first chart shows the relationship between appropriate pricing and the number of showings.  Remember that the more traffic through the home the more likely you are to an offer or multiple offers:

Pricing Pyramid

A home priced at market value  will drive 60% of the buyers in the appropriate price range to the property.  Priced just 10% above market that number is cut in half and priced just 15% above market that number is halved again.   In other words – pricing a home 15% above market value decreases traffic by 75%.  Of course everyone likes a bargain – so underpricing by 15% ensures that 90% of the buyers shopping in your price range beat a path to your door.

The second chart shows how traffic through the property peaks at 2 weeks and goes downhill thereafter all things being equal.

Buyer Activity vs DOM

The bottom line here is that you have about 2 weeks to create a buzz and then its over!  At that point the listing settles in for the long haul competing with every other property on the market.

The worst thing you can do is chase the market down….

In a big bad bear of a market where depreciating prices rule the day – the worst thing you can do is chase the market….What does that mean?  Many sellers desperate to get every possible penny incrementally reduce the price by a few thousand at a time.  The trouble is, that as they are slowly reducing the price, the market is going down even faster and they are losing equity by the week.

An example:
A person puts a home worth $100,000 on the market for $110,000.   The market is going down at a rate of $1000 a week.  10 weeks later, they have gradually dropped the price 3 times and are now at $100,000.  The trouble is, the home is now worth $90,000 and the cycle continues.  The final sales price ends up being lower than it would have been had the  home been priced correctly from day-one.

Chasing the market

At the end of the day – pricing it right the first time saves time, money and heartache.

© Ruthmarie G. Hicks – http://thewestchesterview.com – All rights reserved.

Why can’t we just lower the price later….???

Comments (20)

Gay E. Rosen
Julia B. Fee Sotheby's International Realty - Larchmont, NY
As Real as Real Estate Gets!

Hi Ruthmarie: GREAT post....  I just suggested it. Best, Gay

Feb 11, 2011 02:07 PM
Shannon Lefevre
John R. Wood Properties - Naples, FL
Shannon Lefevre, PA Your Naples Smart Girl

SO many agents need to read this carefully...sigh!  Excellent Post!

Shannon Lefevre, PA

Naples Real Estate

Feb 11, 2011 02:08 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This information is the key to success.  Some sellers get it and they are successful.

Feb 11, 2011 02:12 PM
Elizabeth Cooper-Golden
Huntsville Alabama Real Estate, (@ Homes Realty Group) - Huntsville, AL
Huntsville AL MLS

Ruthmarie, I'm with Shannon...EVERY agent needs to pay attention to your post.  They are doing such a disservice to their sellers.  I find it very disheartening to say the least.

I showed a home this week that was SO overpriced.  I then looked up the sale history.  The listing agent has sold the home to them 2 years ago and they paid WAY too much then.  They are going to lose their pants on this sale.  So sad!

Feb 11, 2011 02:13 PM
Don Wixom
RE/MAX Executives Nampa, ID - Nampa, ID
"Looking out for your next move..."tm

Ruthmarie, you are so, right on track! Pricing the home right AT the beginning, is key. It makes it even more difficult to sell when it is overpriced in a declining market.

Great post!

Feb 11, 2011 02:15 PM
Christine Smith
Buyers Brokers Only LLC - www.BuyersBrokersOnly.com - Canton, MA
Exclusive Buyer Agent & Attorney, Canton, MA

Ruthmarie....you are so right & you have good have good information here to back it up.  I'm with Gay...great post & suggested.

Feb 11, 2011 02:16 PM
Bob Jakowinicz
National Realty Centers Livonia--Bob Jakowinicz - Livonia, MI
Michigan Real Estate Agent-- MI Real Adventures

Good pricing is so important and you did a nice job making the point. 

Feb 11, 2011 02:18 PM
Hans J. Schindhelm
HJS Web Design - New York, Westchester, Putnam & Rockland - Tarrytown, NY
Realty Marketing, Web Site Designer & Virtual Assistant

Great post... as you know, almost all sellers fall into this trap... and it takes a good agent to illustrate what this does to their chances to sell their home at a fair price...

Feb 11, 2011 02:54 PM
Gail Robinson
William Raveis Real Estate - Southport, CT
CRS, GRI, e-PRO Fairfield County, CT

Ruthmarie - This post should be featured.  Great information and great graphics.  The key point you are making is that the wrong buyers see the property when it is overpriced.  They aren't going to make a low offer because compared to other homes they are seeing, it isn't up to par.  In order to get the right buyers to see a property in that critical first month on the market, it has to be in the price range of comparable properties otherwise it will compare poorly and be left on the shelf.

Feb 11, 2011 04:49 PM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Gay - thank you.  I was afraid I went a little over the top on this one.  I figured it was a lot of charts, but I couldn't think of another way to get the message across.  But I thought it was going to be a real snooze to most.

Hi Shannon - there are a ton of overpriced listings around here - but sellers fall for it all the time.

Hi Joan - you can lead the horse to water, but you can't make them drink...

Hi Elizabeth - That's really sad.  The listing agent will never be able to sell and then the seller will chase the market down.  Was it overpriced for two year ago - or for today's prices?  I have one person who bought from me in  2008 who may have to sell in a couple of years.  He didn't overpay for the market as it sat - but it was right before the crash. He isn't upset, but I'm still cringing.  Of course neither of us knew that the stock market was about to implode, but still....

Hi Don - Sometimes its even hard to tell where the market is.  For a while it was declining so fast that you would set a price and then they would break through that price point - and so it goes.  Its been really tough on sellers.

Hi Christine - Thanks - Like I said to Gay  - I was expecting this post to be a snooze.

Hi Hans - all you can do is TRY...Many if not most will go with the agent that tells them what they want to hear.

Hi Gail - That's what I was saying - but you did it much better!

 

Feb 11, 2011 05:25 PM
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

Ruthmarie - This is an EXCELLENT post.  I just suggested.  You are so rightboth in terms of what clients are thinking and what plays out in the marketplace.

Feb 11, 2011 08:38 PM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Ruthmarie, oh we get those questions up here too.  I go through something similar with them.

The charts really help them get a word picture.

Feb 12, 2011 12:25 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Debbie - How are you doing? But sellers fall for it all the time. 

Hi Missy - I think when it comes to listing prices - its the same everywhere.  Sellers get the idea that if you don't ask you don't get.  But the fact is they are preventing themselves from getting anything.

Feb 12, 2011 08:56 AM
Laurie Mindnich
Centennial, CO

How many of us have to hit suggest???? Another great post, Ruthmarie- the visuals are a huge help!

Feb 13, 2011 02:18 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Laurie,

Thanks - Just full disclosure - the two top charts came from the Keller Williams packet.  I moderninzed the  "look" from c 2000-2005 Powerpoint to a 2011 look - so it didn't look like someone had slapped that together in 1995.  The numbers are still accurate. But the basic design is theirs.   I see this trend with all my listings.  Two weeks to peak, two weeks rapid decline and then a slow plateauing in weeks 5-6.  The showings triangle....ditto.   For foot traffic, the two biggest factors are great photos and the right price. I'll spend an entire day on photos - its worth the time.  The chart with the hypothetical listing is mine.  Keller had some great graphics (I thought) but I noticed that it was confusing to the public.  I think it just needed to be simpler.

Feb 13, 2011 03:38 AM
Lori Cain
Own Tulsa - Tulsa, OK
Midtown Tulsa Real Estate Top Producer

Ruthmarie, I suggested also. This is SO important to get across to Sellers AT THE TIME OF LISTING. Wish I could re-blog, but that's still disabled.

Feb 14, 2011 12:18 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Lori - thank you for the suggest - but I think the  Rain Gods really don't want to feature this one.  I was surprised that people liked it so much. It seemed a bit 'charty' and long winded to be so popular.  But it was the only way I could think of getting the message across.

Feb 14, 2011 03:21 AM
Emily Medvec
eXp Realty LLC - Santa Fe, NM
Broker | Realtor | Serving Santa Fe & Northern NM

Ruthmarie, you are right on target. The bottom line is pricing homes for an unstable market. It's that simple. I suggested your excellent post for a feature.

Feb 17, 2011 01:22 AM
Navona Hart
Century 21 Realty @ Home - Farmville, VA
Selling the Best Properties in Central Virginia

Ruthmarie, good post.  For me the first 3 days are the most important, that is when people call and look at it online.  I want it right then!  doesn't always work this way, but it is what I want.

Feb 18, 2011 01:47 PM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Great examples of pricing too high and miss the mark(et)

Feb 21, 2011 01:19 PM