Commentary by Richard Daskam
RISMEDIA, Nov. 9, 2007-In any real estate market, price is the key. It’s just not as important in an increasing seller’s market than in a declining buyer’s market.
In a seller’s market, if you miss the target, market price, the seller can always wait for the market to catch up to their price.
We are currently in a buyer’s market.
In a buyer’s market, if you miss the target, not only will the house not sell, the seller will get angry and frustrated, the agent will feel helpless and worthless, and the home will lose value daily. Even in a buyer’s market, with average 75 days on the market, if a home hasn’t sold in the first 21 days, the seller has lost their “honeymoon period.” That is the time where the limited number of buyers that are out there, looking for the right home at the right price, would have bought the house if it was priced right. After 21 days, the house loses the “new kid on the block” advantage.
In a buyer’s market, the seller has to price their home at tomorrow’s market price, not yesterday’s. If prices are falling 5% a year, then a $500,000 property today will be worth $498,000 next month and by the end of a typical escrow, $495,000. A seller needs to price the house at $495,000 today so they can be the next home to sell, before values go down again.
What if you miss the target the first time? How can you show the seller why they need to adjust their price and to what price?
A price adjustment must begin the day the listing is signed. A properly informed seller will be primed for a price reduction the day they list and will be kept informed of the market weekly.
Discuss with the seller that pricing is an art, not a science. Your suggested price is an opinion, only the current buyers out there looking will tell them if the price is right.
As a rule of thumb, if after the first 21 days, the seller had a lot of showings, but no offers, the price is probably within 5% of market. But, if after 21 days there are very few, or no lookers, the price is likely at least 10% over market, or more. You can explain to the seller that most buyers are willing to offer 5% under the asking price and not be afraid of offending the seller, but very few buyers will offer 10%, or more, under the asking price. The buyers, and their agents, will simply refuse to even look at a property that is 10% or more over priced.
During the first 21 days, and throughout the listing period, keep the seller informed of the market. Do a new CMA every 7-10 days. Be the first to call the seller when a new listing comes on the market around the corner, or when a property goes into escrow or closes escrow. Give the seller copies of news articles about the real estate market, keep them informed. Give copies of all of your marketing materials to the seller so they know what you are doing to sell their home.
After 21 days, if it’s not sold, the seller will likely come to you to give you a new, lower price, because the seller will know they are overpriced.
If you have to go to the seller and ask for an adjustment, go in prepared and armed with knowledge and confidence. A real seller, one that is motivated to sell, will appreciate the information, honesty and your clear picture of the market.
Bring to your face-to-face meeting with the seller:
– Your original CMA – You must show them where and why you priced the house originally. If you allowed the seller to set the first price, ask them how they derived the price from your original CMA.
– An update on each property you used in the original CMA – Show the activity, price reductions, expired, etc., from the first CMA.
– A new CMA, based on activity over the past 21 days – Give them a new CMA and ask them where they see themselves priced at given the new information.
– Summarize your marketing activities – Show them all of the marketing you’ve done to date. Let them see that you have gone above and beyond to find a buyer for their home.
– One or two key articles about today’s market – Remind them of all of the articles you have dropped off. Go over today’s articles about price declines, interest rate increases, job losses, etc., that are affecting the real estate market in your area.
– Give them your new suggested price and why – Show them that given the new news about the market, this is why they need to be priced at $X.
– Show them what the marketing plan is for the next 30 days – Show them that you are in this together and that you will commit to X, Y & Z marketing if they will adjust their price to your suggestion. It’s a give and get situation. You need to show them that with the right price, you can get their home sold and this is how.
With all of this data, you should get the price you want, without a fight and without hard feelings. You are just the messenger in this market.
You need to continue with these steps throughout the listing period.
Every 21-30 days sit down with your seller, go over these items and go for a price adjustment. You may not get one every time you sit down, but at least the seller can’t say you didn’t keep the communication between you open and you didn’t keep them informed of the market. In the end, it’s not you that won’t be able to go forward with a move and it’s not you that has to make that monthly house payment.
If you educate the seller from day one, prepare them for your meetings every 21-30 days, they will appreciate your communication and be ready and open to hear your suggestions, not kick you out the door because you have blind-sided them!
About the author: Richard Daskam is a Broker-associate with Keller Williams Realty in Los Alamitos, California. He is a top producer in the Southern California area.