HOW To Recommend a Price Reduction without Risking Your Credibility or Upsetting Your Seller

By
Education & Training with Sell with Soul

Price Reduction

Related to a recent blog entitled "READ THIS Before Your Next Price Reduction Recommendation, today's post is about HOW to recommend a price reduction if it comes to that without blowing your credibility, or, frankly, ticking off your seller.

In a perfect world (and why not strive for that?), a price reduction is rarely necessary. In this perfect world, real estate agents price, prepare, and present their properties properly (I love alliteration) and therefore homes sell in a reasonable amount of time without the need for a price adjustment. Agents don't capitulate to the demands of sellers to overprice a home, nor do they "buy" listings with inflated estimates of market value, planning to push for a price reduction six weeks later.

Okay, so it's not a perfect world and L'il Miss Smarty-Pantz JAH didn't always score a 10 on the beam either when it came to pricing her listings for sale. Pricing is an art, not a science; the "right price" is a constantly moving target, and can be affected by many factors outside our control. So, it happens. Sometimes a price adjustment is the right thing to do.

So, what might be some ways to approach the price reduction conversation with your seller without jeopardizing your credibility (hey, YOU suggested or agreed to the price in the first place!) or otherwise creating unnecessary drama and angst between the two of you?

I have a few suggestions, but would like to hear yours!

1. Prepare the seller ahead of time that a price adjustment may be required if the market doesn't respond as favorably to the home as we hope it will. But do this carefully, not with a pre-printed price adjustment form or with a snotty attitude of "Well, we'll TRY it your way if you insist, but BE PREPARED to reduce the price," but rather as if you have just as much to lose as the seller does. In other words, "as if" you're on the seller's team... which you are, right!?

2. If you recommended (or agreed to) a price believing with all your heart that you were in the ballpark, but discover that, um, you weren't, take the blame. Admit that you were wrong and that you're very sorry you got the seller's hopes up. Perhaps something like:  "Bob and Sue, I blew it. I really thought your house was nice enough to overcome XXX, but I was wrong. I'm glad we gave it a try, but I do think we're going to have to reduce the price significantly. Let me tell you what I'm thinking..."

3. As pontificated about in the original blog, it's best NOT to lead with a price reduction as your primary solution, for several reasons. One of those reasons is that if you are able to suggest alternatives to a price adjustment and the seller rejects your suggestions (e.g. stage the home, replace the carpet, mow the lawn, etc.), then you can feel much better about recommending a price reduction because it's actually the seller making the choice to reduce instead of fix or improve.

4. Related to #1, when a seller wants to push the price beyond your comfort level and if he's not too far removed from reality, agree to try his price for a week to ten days, no more. Don't get snotty about it because the fact is, you don't have a crystal ball; maybe the market will respond more positively than you expect! Say something like this: "Okay, let's try it for a week or so. It's a bit higher than I'd like, but I don't want to give away your money if I'm wrong. If we aren't getting the activity we need or if the feedback indicates the price is high, we'll reduce it to $XXX,XXX, deal?"

So... there are some suggestions that worked for me... any you'd like to share with the class?

 

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Re-Blogged 1 time:

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  1. Lea Ann Muriset 11/02/2011 05:51 AM
Topic:
Real Estate Sales and Marketing
Groups:
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Learn to be a Top Producing Listing Agent
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The Ninety-ninth Percentile
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Rainer
54,960
Jairo Arreola #SOLDBYVETERAN
PRG Real Estate - San Jose, CA
VA Home Loan Specialist - SF Bay Area

Great Way to have the seller's informed and educated. At least they have the info they need.

Nov 02, 2011 08:52 AM #52
Rainmaker
508,351
Sylvie Stuart
Realty One Group Mountain Desert 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagsta

Great ideas for an at times, tricky subject! I tell them too, where I know we need to be. If we go higher than that, then I show them how much online activity we are getting. If we are getting a lot of online activity and no showings, then there is something wrong, which usually is price. Also if we are getting more than 8 showings without recieving an offer, there is something wrong, too.

Nov 02, 2011 10:10 AM #53
Rainer
39,398
Michael Singh,Broker
Singh Real Estate - Corral de Tierra, CA

Discussing the possibilities of a price reduction if it doesn't generate any offers up front is a good idea.  Inflating the price to get the listing is a very bad practice.

Nov 02, 2011 10:13 AM #54
Rainmaker
1,004,473
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Evelyn in #50:  What I would have done with your seller is had her sign a $25,000 price reduction right there at the listing table when she listed her home, and agreed to the price reduction.  Then, it's done, and you don't have to contend with it later.

Also... you said you "emailed the comps" to your seller.  Do they live out of town, or near enough for your to drive to them, and show them the comps in person.  Just wondering...

By the way... what was the listing price of the house... just to know what we are talking about... ?

Nov 02, 2011 01:03 PM #55
Rainmaker
1,004,473
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Evelyn, I might also "reverse" on the seller.  Just ask her IF... you found a buyer who agreed to pay her price, and then she actually WAS the appraiser, and had to submit three comparable sales to support the price and get the loan approved... which three would she submit?

Well... they are not there TO submit.  So, she would end up telling you that there weren't any comps.  You then ask her how it was supposed to appraise ?  She would have to tell you that... "it wouldn't... because it couldn't."

Nov 02, 2011 01:08 PM #56
Rainer
144,225
Former Agent
None - Adak, AK

Of course, you would do an updated CMA to determine the appropriate price at the time of the price reduction.  However, there are situations, as you said, where you know from the initial listing, that it is over-priced, and you also have some idea of where it should have been positioned in the first place.  How many Sellers think one to two weeks is enough time on the market to reduce?  And, in asking that, I am not being contrary or facetious. 

Nov 02, 2011 01:53 PM #57
Rainmaker
134,231
Marcia Kramarz
Re/Max Executive Realty - Medway, MA
CDPE,LMC,CBR

Excellent suggestions - And good idea to read your blog BEFORE YOU PRICE a home - SO you don't have to eat your words later!  Thanks!

Nov 02, 2011 03:39 PM #58
Rainer
116,418
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Great Post.  Take the blame, you listed it at that price.  I will take a reasonably over priced listing, but I always lay the ground work for a possible reduction if we are not getting "boots in the door'.  If there are no showings we need a quick reduction to drive some traffic.  If this is not agreeable, then get it off the market as we are wasting time and the longer it stays on at the wrong price, the lower that price will have to go to eventually sell it.  It rarely fails to happen this way.

Nov 02, 2011 04:06 PM #59
Rainmaker
1,675,919
Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

Boy, I have to say pricing here in S. Florida to me takes on a whole different word. I've read a lot of posts about how to price, but with all the REO's and Short Sales it really is anyone's guess. REO companies price the property in some cases 100% below what it sells. Short Sales in a lot ways the same. The industry down here has turned into a glorified Auction House.  

Nov 02, 2011 04:23 PM #60
Rainmaker
834,532
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Jennifer, What a great blog.  Really like your suggestions and will use them on next price reduction.

Nov 02, 2011 11:19 PM #61
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Interesting the differing viewpoints on "taking blame." I think it's a matter of your own comfort level and personality. For some people, saying "I blew it" just wouldn't suit their personality in the situation and that's just fine. It obviously doesn't fit all circumstances either. But when I truly feel that I made an error in pricing (hey, it happens), I have no problem taking responsibility for that and moving forward. Oh, I don't make a big fuss about it, I just confidently confess to missing the mark and presenting my new opinion based on the feedback, etc. I've never had any push-back from it - in fact, sellers seem to appreciate my honesty and willingness to accept responsibility.

Regarding getting agreement to a price reduction ahead of time if things aren't going well, I would never make it a 30-day thing. I make it clear that we're trying a price I think is too high and that we should have our answer within a week. Of course, this assumes that there IS a market for the home - that is - that there are buyers for it if it were priced right. If it's normal in your market for a home to only get a showing or two a month due to lower buyer activity, this approach probably won't work.

But of course, as many have mentioned, the BEST way to ask for a price reduction is to NOT ask for a price reduction - because you hit the target on Day One! Let's shoot for that!

Nov 03, 2011 01:46 AM #62
Rainmaker
736,269
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

as far as the Blame piece.... I had a deal from hell in August.  I called every one involved and said: "I wish it was my fault so I could say I am sorry and fix it, But it isnt"  When 3rd parties screw up and you are waiting for them, and pushing them constantly to do their jobs.. That is almost worse than just fixing an oops that may have been your fault!

Nov 03, 2011 04:34 AM #63
Rainmaker
484,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

I LOVE it Robert!!!

Nov 03, 2011 05:25 AM #64
Anonymous
Peter Michelbach

Jenn - realy love your 'dont want to give away your money...and your talk from the heart '...being wrong on the price'.

That powerful statement in combination, clearly shows a veritable change in energies and frequencies on a DNA level - and more over - the seller will significantly appreciate and value the congruence of being honest and truthful with her/him.

"Riding" on the same frequency, matching frequency with frequency creates that attraction and balance, around our clents, or loved ones and at the end builds ways on the music of life for new opportunities, for growth, ecstasy and abundance for all.

That's called pioneering and a build up of trust inside ourselves, which then energises the client - for without faith we can not promote the service to get that price right!

Loved all the brilliant ideas, suggestions - please stay with me - I'm in the middle of writing assignments - and when the fleeting moment of time is right, then I'll merge again full ship towards new territories and challenges. Buy then, the economical problems in the Euro-zone should be cleared, Greece back on it's feet, and Spain, Portugal and Italy re-systemized. And America's economy, among the weaving of challenges and eco-political puzzles - full speed ahead. Cheers from Perth - W.Australia

Nov 05, 2011 01:18 AM #65
Rainer
295,383
Paddy Deighan JD PhD
TimeshareLawyers.pro - Vail, CO
Paddy Deighan J.D. Ph.D

nice insight into a difficult situation - especially in today's market

Nov 05, 2011 04:18 PM #66
Rainmaker
317,638
BILLY CRITTENDEN
Missoula Valley Properties, LLC - Missoula, MT
Broker/Owner,ABR,CRS,CNE,CNHS,GRI,RCC,SFR,SRS,SRES

Preparation, preparation and more preparation. Put yourself in the sellers shoes. I have been there myself.

Nov 16, 2011 12:18 PM #67
Rainer
8,393
Denise Montalvo
Bradley Real Estate - San Anselmo, CA
Realtor on the Move – Keeping Pace with the Market

I got a listing and the seller decided she had to start at $20,000over the agred upon price. I said we would try it for a week or two. Well, after two weeks she wouldn't reduce. She also lived in the home and would only allow me to hold it open on Sundays. I finally used comps and got her to reduce it to the starting price. She said she wouldn't "give" her home away. Finally after losing the summer I was able to use a new listing in her subdivision to get her to come down. We got a great buyer and closed. I showed a lot of compassion for her during the process because she was losing money on a home she put a lot of heart and mpney into. I think it helps to keep showing them comps but to also try to understand how painful price reductions are for our clients. I also told her that it wouldn't appraise at the higher price because the comps didn't support it.

Nov 19, 2011 01:12 PM #68
Rainmaker
1,607,549
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Since we don't have crystal balls we chose to put the price reduction in the listing agreement so that the price will be reduced monthly.

Nov 25, 2011 02:35 PM #69
Rainmaker
273,464
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

Great post and great comments! I always like to hear different points of view.

Oct 11, 2012 02:10 AM #70
Rainmaker
1,482,681
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

I use the same technique. I present comps just in numbers using Excel look. Than they are just numbers and no one can not argue with that. I present my case comparing identical houses and let them decide. If they resist our suggested listing price, I tell them: I'm willing to list your house for any price you want. Just know that if in three weeks we have no activity, we'll need to adjust the price. Just remember, that many opportunities might be lost during this time. 

Feb 18, 2017 08:48 PM #71
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Rainmaker
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