(This is Part 2 of a two-part series. Read Part 1, “What’s working in today’s market?“)
“Transforming the Market in 2008,” a book written and published in just one week at the National Association of Realtors conference in November, reveals what agents are doing today to get their listings sold.
Last week’s column examined the major challenges that agents are facing in today’s market as well as buyer acquisition strategies. In a buyer’s market, listings are difficult to sell. Here’s what the agents who contributed to “Transforming the Market in 2008” report is working in today.
1. Make your listings stand out: Staging is critical. One agent suggested walking through each room with the sellers and dividing what must be done into one of three categories: “necessary changes,” “you really ought to,” and “desirable changes.” Sellers are often overwhelmed at how much they may have to do to make their houses saleable. This strategy allows the sellers to identify what is absolutely critical as compared to what is desirable.
2. Provide financial incentives: A large number of agents are having sellers use financial incentives to attract buyers. Strategies include contributing money to closing costs, offering a higher cooperating commission to buyers’ brokers, and paying the buyers’ homeowner association dues for one year. Two additional strategies are to buy down the buyer’s interest rate for one to three years or to purchase a home warranty for the buyer.
3. Avoid chasing the market down: Agents had a variety of strategies to help sellers be more realistic. Among these were discussing absorption rates and how they relate to the market. For example, if there is eight months of inventory on the market, the probability that the property will go under contract in a given month is 12.5 percent. The probability that the property will not sell is 87.5 percent.
A second approach is to ask sellers how much time they have to sell their property and whether they are willing to wait for the market to come to their price. You could also ask whether the sellers want to run a sprint or a marathon. Follow up by asking what happens if their house does not sell.
The third alternative is to show sellers how well-priced properties stay on the market a shorter period of time. If prices are declining, the sellers have a choice. They can be the trend setters who get their property sold or the sellers who chase the market down.
Finally, you can ask sellers which section of the multiple listing service that they want to be in: the “solds” or the “expireds.”
4. Offer strategies: One strategy that we used for many years in California was to obtain a price reduction whenever the seller writes a counteroffer at less than asking price. This puts additional pressure on the buyers to act. Also, many sellers become discouraged when they receive an especially low offer. Instead of becoming discouraged, tell them to feel good about generating an offer in this market.
5. Show the sellers how much they’re saving: When the seller is purchasing a less expensive property, calculate how much the seller saves each month when they are in their new property. For example, if the seller’s mortgage will be reduced by $1,000 per month, that represents a $12,000 savings per year. Each month they don’t sell costs them another $1,000. On the other hand, when prices are going up, show them how much they gain by buying a trade-up property. If your clients are listing a $300,000 property and they are purchasing a $500,000 home, calculate how much your current market has declined. Assume the market has declined by 5 percent. The sellers will reduce their price on their $300,000 property by $15,000. The same 5 percent reduction results in $25,000 on the $500,000 property. Thus, the seller picks up an additional $10,000 in appreciation by purchasing a more expensive property.
6. Reverse contracts: This may be the most innovative idea in the entire book. When the buyer is having difficulty deciding about purchasing a specific property, the listing agent can launch the negotiation by asking the seller to issue a “reverse contract.” This involves the seller drafting an offer to the buyer, generally at a price slightly under asking price. While this may not always work, it is an excellent way to see whether the buyer is actually serious about purchasing.
Ultimately, the best way to cope with this market is to change your mind set:
“Let’s stop talking about the boom days and lamenting the bust days. Let’s start talking about the benefits of home ownership, the pride in neighborhoods, and taking a positive approach to the market and to life in general.”
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at firstname.lastname@example.org or visit her blog at www.LuxuryClues.com.