No matter how good the market is, there are always overpriced listings that fail to sell. If you have an overpriced listing, there’s no better time than now to persuade sellers to lower their price.
What causes overpriced listings? Reasons include the listing agent’s lack of negotiation skills, market shifts due to COVID-19, overbuilding in urban condo markets and fewer foreign buyers. If you have an overpriced listing that needs to go on a price reduction diet, here’s what to do.
1. The best defense is a good offense: the ‘honeymoon’ period
Testing the market is a poor idea because most showings occur during the so-called “honeymoon” period — the first 14-21 days the property is on the market. After this initial surge of buyers, showings drop dramatically.
If we’ve had good traffic, and you haven’t received at least one offer during the first two weeks your home is on the market, you really need to reduce the price. Otherwise, your listing can end up being on the market for months.
2. The 10 days or 1,000 page views approach
Here’s a similar strategy you can also use on listing appointments. When you take the listing, tell the seller that if you have 10 showings with no offers or if they have 1,000 page views and only a handful on showings during the first 14 days they’re on the market, they’ll need to drop the price.
If the sellers agree to this provision, include it in the listing agreement along with how much the price reduction will be.
3. ‘You’re not doing your job’
When the price is wrong, it’s common for the sellers to blame the listing agent: “You’re not doing your job — we have hardly had any showings!” To overcome this objection, show the seller the number of page views their listing has had online.
Here’s how to do it:
- Most multiple listing services allow you to track how many page views your listing has had.
- Zillow has a counter that displays how many times a listing has been viewed on Zillow and how many times it was saved.
- Realtor.com also provides this information in its “performance reporting” summary.
- Redfin and Trulia also provide these services.
The smart move is to add all the page views from other various services including:
- Your Facebook business page for this listing.
- Any virtual open houses posted on Facebook Live or Instagram TV.
- The number of page views on YouTube for your listing video.
- Assuming you used a virtual tour, the number of page views the tour received.
- If the house was open to the public or for a broker tour, the number of people who toured the property live.
Here’s the script:
Mr. and Mrs. Seller, as you can see from this spreadsheet, your listing has had over 10,000 page views during the past two weeks. This doesn’t include the 100 brokers and open house visitors we have had at our broker’s open and Sunday open houses.
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?
4. The odds of selling — when the market is the issue
Here’s another tried-and-true approach for getting a price reduction. If you’re listing is located in an area with too much inventory and prices have started to decline, here’s what to say. (Assume there is currently 25 months of inventory on the market.)
Mr. and Mrs. Seller, there are currently 25 months of inventory on the market. This means if no new listings were to come on the market, it would take over two years to sell all the current listings. In other words, the odds of you selling in today’s market in any given month are 4 percent. The odds you won’t sell in any given month are 96 percent.
Consequently, you have an important decision to make. Will you be one of the 25 sellers who will sell this month, or will you be part of the 24 sellers who will still be listed next month? It’s your choice. What would you like to do?
This approach works not only at listing appointments and for price reduction appointments, it’s also equally effective during offer negotiations.
5. If you’re seeing price declines
A number of the AI-powered listing tools show whether prices are increasing or decreasing. You can also calculate the rate of decline yourself by doing the following:
- Go to your MLS, and identify the comparable sales that have closed during the past 90 days. Calculate the average price per square foot for the closed properties. (Be sure to follow the 10 percent rule — the square footage on the improvements and the lot size should be within 10 percent of those for your listing.)
- Repeat the process for the 90 days preceding the first time period.
- If the number for the most recent 90 days is lower (compared to the earlier 90-day period), then prices are declining. Comparing the two numbers also allows you to calculate the exact rate of decline for the properties in your area.
The beauty of this approach is you can actually show the seller how much waiting to sell may cost the seller. Here’s what to say:
Mr. and Mrs. Seller, even though the overall market is still very strong, in your price range and location, property values have declined by 2 percent over the past 90 days. On your $500,000 listing, that’s a total of $10,000. This doesn’t include the costs of making your mortgage payment, your taxes and insurance.
You now have an important decision to make. Do you want to reduce the price on your listing to avoid chasing the prices down, or do you want to wait and run the risk of prices dropping another $10,000 over the next 90 days? It’s your choice. What would you like to do?
If any of your listings need to go on a price reduction diet, now’s the time to lower the price. If the property still hasn’t sold by January, then it’s time to do another price reduction, update the description and take new photos so your listing looks “fresh and new” for 2021.
Bernice Ross, President and CEO of BrokerageUP and RealEstateC