We have all heard it before, “Days on Market is the enemy of selling a home” and according to Zillow.com, as of June 2018, Nationwide, 12.9 percent of sellers reduce the price of their house at least once. Sellers who accept an offer within the first week of listing have a 57-percent chance of selling for list price. During week two, it’s 50 percent, and then it drops to 39, 32, and so on. Of course, this is based on national data, and if you live in a strong seller’s market, your odds of selling for list price, and quickly, are much higher.
Jeff has told us many times, when selling a home, it is a “price war and a beauty contest” which means that the homes that offer the best value to buyers will be the homes that will sell quickly and offer the seller the most leverage to be able to negotiate better terms for their sale.
Since we are going to see more and more expired listings in this shifting market, it is important to be able to talk to sellers about properly pricing their property and price reductions. A discussion about a price reduction should never be a surprise.
It is also very important to keep their motivation for selling at top of mind, always reminding them of their “why” when having these discussions. Most people are either motivated by “pain” or “pleasure” which means if your seller is motivated by pain, maybe they are downsizing and do not need or can no longer afford the large monthly mortgage and tax payments. If they are motivated by pleasure, perhaps they are relocating to be closer to their children or grandchildren. Whatever the case, when you are in discussions with them for price reductions, always point out a few good reasons that this price reduction will help get them closer to that goal! Don’t just go in with market stats and data.
One strategy that I always use prior to having the discussion of reducing the price is to email them updated comps. In almost every case that a price reduction is needed, there is new comp data to support your recommendation. I email this to them in the morning to give them a chance to review it. I also include a suggestion in the email on what price I feel would make them competitive and will potentially see more showings and offers. If they are willing to sell the home for the price that you are suggesting, I always mention that it is better to receive an offer and be able to negotiate then to not have any offers at all. This way, when you speak on the phone later in the afternoon, they have already had a chance to look it over and you can reference back to those comps. This is helpful because they can see and process the actual facts of what is going on and it takes the “blame” off of you.
In some cases, if the motivation is high enough, you could get an email back saying “I agree, let’s do it”. Worst case scenario, they are mad but they are mad at the facts and not you so the conversation is a little easier when they have a chance to digest the information.
Once the seller agrees to your price reduction, make sure it is substantial enough to get them into the next lower price bracket. For example, if you are sitting at $235,000, do not accept a reduction to $230k, make sure you are going down to $225k, putting your sellers home in front of a whole new audience of buyers looking “up to” $225k. Then, let them know that you will notify all the buyers that looked at the home of the new price and hopefully that will get a few of them off the fence!