3 Conflict-Free Steps to Scheduling Price Reductions
Somewhere on the East coast, towards the Canadian border, a homeowner calls an agent for a price on her home. The agent evaluates the home and gives the seller a price. The seller wants to sell her home but thinks the price is too low. The agent, needing the listing, allows the seller to talk her into listing it too high.
Six months later, even after minor price reductions, it expires.
A second agent takes it, beats the homeowner up on price and finally sells it for what the original agent had told the seller in the first place.
Three thousand miles away on the East coast, an agent’s client wondered if she cared about their listing when it expired. They said she didn’t make a big pitch to keep it active. The agent explained that the house was unfinished, over-priced and as a result everyone’s time was being wasted. On that advice, the homeowner finished the interior, reduced the price and within a few weeks there was action—and a legitimate offer on the home.
Another agent in Chicago explains “Once you determine that the seller is unreasonable and overpriced fire them before they fire you. A cancelled listing is easier to explain and you will feel better walking away.”
Dump a potential commission check in a cut-throat business like real estate? Have real estate agents gone bananas?
No, not quite.
In the interest of exploring this topic further, not long ago I decided to find out if overpriced homes are the leading cause of expired homes. I polled 406 real estate agents from across the country and asked them eleven questions. The question that this article will deal with was “What do you think is the number one reason a homes expires? Why?”
The response confirmed my hunch (and will probably confirm your hunch too): plain and simple, three-hundred and sixty-nine agents said a home expires because it is overpriced.
Equally interesting answers that made up the balance of the survey, and would prove entertaining and a mistake not to share with you at this point, are as follow.
I commonly saw this thread throughout the results: an agent does not ask for a long enough listing. The length of the listing is important. A short listing, say 2 months, could prove fatal. I agree.
Another answer that cropped up occasionally was the “agent lacks skill to properly educate the consumer about market times and handle the consumer’s objections.”
The lack of skills and courage to speak up could make a huge difference. That’s why proper skills in sales and negotiations is critical to your success as a real estate agent.
Another answer that I saw quite a bit was communication—lack of communication to be more precise. Most agents agreed that expireds (in fact, all things real estate) can usually be fixed with consistent open dialogue with the client from the beginning.
Like one agent said, “Too many agents avoid the client in order to avoid the inevitable…an expired listing.” Bottom line, failing to communicate with the seller spells trouble.
The condition of the home also proved to be a fairly popular reason why a home expires. Poor advertising, no advertising, procrastination, lack of dedication to the listing and low-self agent esteem will also kill a sale.
One Sound Strategy to Deal with Overpriced Homes
So, what are you to do when faced with a seller who wants to list at a high price?
A lot of real estate agents said, “Don’t take the listing unless it’s priced right from the start.”
This is a sound strategy. In fact, many agreed that accepting an overpriced listing begins with the agent: your first job is to educate the seller on the market so the seller can have a realistic expectation of the market—and you can get control of the seller, bringing their expectations back to reality.
But there was an equal share who didn’t have a problem accepting an overpriced listing. What these agents had in common was a solid 3-step process for controlling the seller and her expectations.
Here the steps that they used:
1. Get a commitment from the sellers to lower the price within 14-30 days of listing if no offers have come in.
2. Get the commitment from sellers to do the things required to give the home its maximum market appeal (cosmetics).
3. Adjust price on a schedule.
These 3-steps can be built into the contract, providing an important opportunity for you to explain the importance of scheduling price reductions during the listing presentation.
You could say:
“We aren’t going to automatically do price reductions, unless your home doesn’t sell by a specific time. And the reason we want to do it this way is because we want to protect your home from any stigma that will build if it sits on the market for too long. You probably already know this, but when a house with a sign in the yard sits for 60 days or longer people start to think that there is something wrong with it—termites, foundation cracks or overpriced—which hurts your chances of selling the home, and may even suck in bottom feeders who know you are anxious to sell your home. And you don’t want to sell your home to bottom feeders, do you? No, I didn’t think so. We don’t want that to happen to your house.”
Using these three steps could give you shock-proof protection from the harmful affects of listing an overpriced home, namely, protecting you from a listing expiring.
What are your thoughts on expired listings? Accepting over priced homes? Scheduled price reductions? Do you agree or disagree?