You thought you priced the listing right or perhaps you weren’t strong enough to persuade the sellers to list their property at market value. Whatever the reason, your overpriced listing isn’t selling. What can you do to persuade the sellers to lower their price?
Pricing properties correctly in a declining market is difficult because the recent comparable sales may be higher than the current market values. When it’s time to have a tough conversation with your sellers about lowering their price, here are two proven ways to do it.
1. Prepare sellers for a price reduction when they sign the listing
Sellers often say, "We want to test the market." Testing the market is a poor idea because most showings occur during the so-called "honeymoon" period, or the first 21 days in which the property is listed. After those first few weeks, showings drop dramatically. If the listing doesn’t sell during the honeymoon period, it can end up being on the market for months.
A proven strategy is to use the "10 days, 10 showings or 100 page views" approach. When you take the listing, tell the sellers that if they have been on the market for 10 days, have had 10 showings with no offers, or if they have had 100 online page views and only a handful on showings, they need to drop the price.
Ten days is plenty of time to generate an offer if the property is priced right and the market is strong. If your market is still struggling, use the "10 showings or 100 page views" approach.
To use the "100 page views" approach, you must be tracking the activity on each of your listings. There are numerous ways to do this. Sites such as Point2.com (full disclosure: one of our company’s affiliates), Postlets.com, and a number of real estate company websites syndicate to numerous real estate portals.
The Point2 system allows you to track exactly how many leads are coming from each of its syndication partners. Most major real estate companies as well as most multiple listing services track this data, but agents may not necessarily have access to it.
When the price is wrong, it’s common for sellers to say, "You’re not doing your job — we haven’t had a single showing!" To overcome this objection, show the seller the number of page views their listing has had online. If you use any of the major syndication portals, it’s common to have well over 100 page views. Here’s what to say:
"When you listed the property, you agreed that if you had no offers after having 10 showings or over 100 Web visitors, you would lower the price. As you can see from this printout, in the last seven days your property has been viewed 242 times. There have been no showings.
"The issue here is the price, not the marketing. Consequently, you have an important decision to make. Are you going to lower the price to where the property will sell, or are you going to leave it at the current price and let it sit on the market? It’s your choice: What would you like to do?"
2. The odds of selling
This powerful script worked exceptionally well with the bank presidents and bank-owned property (REO) managers that I represented for many years. It also worked with the board of directors for Haseko, a huge Japanese home development company.
One of my clients made an offer of $1.1 million on a $1.5 million Haseko listing. The offer was spot on in terms of the comparable sales. The home office in Tokyo looked at the comps and said "no."
We resubmitted the offer and increased the price by $10,000. Because I couldn’t speak to the board in Tokyo in person, I drafted a letter. This is what it said:
"During the last six months in the $1 million to $1.5 million price range in Brentwood (Calif.), there have been 300 active listings and 30 closed sales. In other words, each month, only 1.67 percent of the listings sell and 98.33 percent don’t sell. Given this absorption rate, even if no new listings were to come on the market it will take five years to sell all of the existing inventory."
This approach worked well, not only with Haseko, but in numerous short-sale and REO situations as well. Here’s another version of the same approach:
"Mr. and Mrs. Seller, you have an important decision to make. Are you going to be the one out of 60 homeowners in your area who will place their property under contract this month, or will you be part of the 59 out of 60 who will still be listed next month?"
These two powerful approaches work with most sellers. If you have an overpriced listing, contact your sellers now and try one of these approaches. You may be very pleasantly surprised when you get the price reduction that generates a ready, willing and able buyer.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.