I don't believe in price reductions. Never have. I believe that just about any home can sell in 30 days or less, in any market, if it's priced properly on Day One. And no, by "properly" I don't mean "under" although that may very well be the case in many markets. If a home sells in the first month of marketing, it WILL sell for market value and the seller will almost certainly obtain the highest possible price. We all know that extended marketing times do nothing positive for the eventual sales price, not only due to the perceived stigma of a high DOM statistic, but also because the seller is darn tired of cleaning the litter box every day and wiping up his toothpaste spit in the morning!
My goal was always a 30 day sale.
However, lest you think I'm Miss Perfect Smarty-Pantz who never lets her sellers take the upper hand, au contraire! I've been convinced more than once, more than twice, more than 100 times to "Try my price for awhile, we can always reduce it later." But, as we all know, this clever little strategy doesn't work. Ever. It always backfires on the seller AND his agent. The seller walks away with less money in his pocket and the agent ... well, we know all the pitfalls of having an overpriced home languishing on the market. Ugh.
But we do it. We agree to "try" a price for awhile, against our better judgment. Lotsa' reasons for this, some good, some not-so. And on paper, it makes sense, doesn't it? Especially to sellers who don't mess in the real estate market on a daily basis as we do. In fact, when you sell your very own home, you'll have a tough time convincing yourself to price aggressively from Day One. The words "I don't want to leave money on the table, let's try this price for a while and reduce it later if necessary" will flow effortlessly from your mouth. Or better yet, the classic "Buyers can always make an offer!"
Ah well, we're not perfect either.
A lot of agents recommend adding an automatic price reduction provision to listing contracts, stating that the price will be reduced by a nice tidy percentage at pre-determined intervals. I never used this provision; it just sounds unprofessional to me. A market can dramatically change in 30 or 60 days. In 90 days, we may have an entirely new market. It seems to me that our sellers deserve a little more personal attention than that. As real estate professionals, doesn't it make more sense to actually review the market and provide real DATA to our sellers instead of relying on the convenience and expediency of a built-in price reduction?
So let's look at the pricing pickle in a different way. Howzabout if you, during your pricing discussion, explain to your seller that you will review the market every 30 days and provide an updated CMA to him. Then, CASUALLY mention that due to the unstable market (or even declining if that's the case), the seller needs to be prepared that your 30-day CMA may show a lower market value. That your 60-day CMA may show an even lower value. You just want him to know this ahead of time so that he isn't surprised or blindsided.
Then BE QUIET.
Don't draw any conclusions for him, or try to summarize your pricing strategy. Your seller is no dummy; if you respect his intelligence, he may just come to the right conclusion himself. In fact, he probably will. However, if he feels you are beating him over the head with your agenda, he may dig in his heels and start throwing out those objections we've heard over and over. BAM! You and your seller are suddenly adversaries.
But if HE asks YOU how to avoid the price reduction game ... suddenly YOU'RE the expert in his eyes! It's a beautiful thing. If he asks, feel free to demonstrate your expertise and brilliance. Talk about the 30 day sale, the market value death spiral, how the DOM statistic affects buyer perception of appeal. But again, let him draw his own conclusions. If you LET HIM, he will almost always choose the right path.
What think you?
copyright Jennifer Allan 2007
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