Price Reductions

Talk about an awkward pause…it’s that thing that happens when an agent initially broaches the notion of reducing the price on a listing. You see, when a seller puts their place on the market they’re all bravado…they really feel like their place is the greatest thing since sliced bread and certainly buyers out there will share their enthusiasm…won’t they? Often a seller will base their list price on what they feel they need to get out of the place. Those feelings can come from a variety of reasons, could be they need a certain number because they owe so much on the property that they’re stuck if they don’t get an offer at a given price. Could be they’ve done a fair amount of work on the property and their price reflects that expense. It could also be because the price they want will make them feel like it’s worth it for them to sell.

Here’s the problem…buyers don’t really care what the seller needs. Oh, I guess they do if it’s a multiple offer scenario, but then they usually exceed the sellers expectations. If you’re not getting multiple offers you can expect that the buyer isn’t going to be too excited to fulfill your needs if you’re a seller. The buyer is naturally concerned with his/her needs first and negotiating a price is typically high on their list.

As I wrote a week or so ago…if the relationship between the listed price and the perceived value of the house isn’t compatible there’s going to be a problem selling the place. There are several clues to whether or not you’re in need of a price adjustment of you’re a seller. 1) Are you getting showings? 2) Is your agent getting any phone calls inquiring about the property? 3) Is anyone picking up disclosures? 4) Are the open houses well attended? If the answer to these questions is no…it’s most likely time to make a move on that price. Maybe the greatest fallacy that I’ve discovered since I’ve been around is the notion that the right buyer is out there on the horizon and sooner or later they’ll come along and meet your expectations. All you have to do is be patient…eventually the right person will love the place just as you do…and they’ll meet your price. I have two responses to that, 1) Fat chance! and 2) be prepared to wait until the market naturally appreciates enough so that your current price looks like a value, probably over the course of several years! In some cases, if a house is going to sell it may need more than one reduction.

At the end of the day, all the marketing bells and whistles (virtual tours, magazine or newspaper ads, glossy flyers, broker tours…ad nauseum) are never going to sell the home if it’s overpriced to begin with. In my experience at least, buyers really know intuitively when a home doesn’t represent value. The house ultimately is the thing that sells itself…and if it doesn’t offer that value it’ll be very hard to sell.

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