Lately I've seen some truly remarkable price reduction e-flyers landing in my email. They seem to tout the reduction as a great thing that should make my clients happy and eager to buy their home. I don't see it that way, and I feel these massive reductions are hurting all of us.
Obviously as agents many are being asked to list homes at absurd prices that do not accurately reflect the marketable value of the home at the time of the listing. I view it as seller's denial. Apparently some people out there feel they still hold a lottery ticket that will enable them to reap huge profits in a short amount of time. Because of that belief, they still want to list their homes at dream prices in hopes they can cash in on the sales frenzy of yesteryear.
All this has accomplished (because their certainly not getting those crazy prices) is that buyers out there are lead to believe the market is crashing. I recently received an email from a client that has been looking at homes and she said she wanted to wait until next year when prices have stopped tumbling downward. Her belief this was happening is based on the fact that homes she has viewed now reflect price reductions of up to $65,000 shortly after hitting the market. Also many homes that the MLS list as Sold are showing accepted offers 25k under asking and often more.
I really don't see this as a market crash, but more of a reality check. If you list a home, and then two weeks later drop the price sixty five thousand, then I suggest you listed it absurdly overpriced to begin with. I tell my clients if you put a crazy price on your house it will not sell, it's that simple.
I realize we can't control what people ask for their homes, but we can educate them, and when necessary decline the listing. We are doing them no favors by listing the home at a crazy price to appease them (knowing it won't sell), and then dropping the price drastically once they realize we were correct in our assessment. We are in fact creating an illusion of a market crash.
I recently had a client that wanted to list her home $50,000 more than it was actually worth. I suggested we get an appraisal to support the price and she declined. She then went forward and listed it at an appropriate price. It hurts the entire market when we inflate the listing price and then tumble it down in a couple of weeks; or do so knowing it will likely sell for an offer that's considerably less and more appropriate.
But, that just my opinion.
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Bellevue Real Estate Agent serving the Seattle Area including Eastside, Somerset, Newport Hills, Lakemont, Cougar Mountain & areas around The Golf Club at Newcastle as well as most parts of Seattle.
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Michael, good for you for pricing things APPROPRIATELY.
I am know declining anyone who wants to list their home outside of the normal market conditions. Sometimes even when you have a listing, price it right it still sits. Frustrating.
Words to list by.
On the bright side-those flyers indicate that there are sellers in the marketplace willing to accept their mistake, and adjusting accordingly. Even in the best of markets, folks miss the mark on price-the true indication that a seller wants to actually sell is a reaction to a market rejection.
Michael - If I go through a listing presentation and the seller and I have a difference of opinion about the price the home should be listed, I am not surprised. I don't pack up my briefcase and head to the door. I don't tell them, it is my way or the highway.
No, I move to my prepared phase II of the presentation. I offer them the opportunity to list the home at the price they believe is correct if they will agree to trigger point reductions based on activity. There is a certain level of virtual tour hits if a home is priced correctly. There will be a certain number of viewings if the home is priced correctly. These activities begin to occur as soon as the home is in the MLS. If the level of activity does not meet preset levels, the seller agrees to reduce the price at that point. The are agreeing upfront to the reduction so I do not have to go through the "your house has no activity, we need to reduce the price" conversations. Price reductions are planned and preset based on the markets reaction to the price.
It may be disconcerting to you but sellers will have to move to a realistic price point at their own pace.
On one occasion I had already placed the sign in the yard and the client had signed the listing agreement at the agreed upon market price. The client then called and wanted to raise the price to a completely unrealistic price. As much as I like that particular client, I had to let them know I would be removing my sign the next day. Only then did they decide to leave it at the fair market price. You can't blame people for wanting to squeeze every dollar from their home. But, you also can't let them slap a crazy price on the home just to see if somebody is crazy enough to pay it. The banks don't hand out money on homes with inflated prices supported by appraisals that "push value" any longer.
So even if they did get lucky enough to find a buyer that was so poorly represented they would offer above and beyond market value, it's not going to close once the appraisal comes in. I just tell them the truth; when it comes to selling your home for more than it's worth, you missed the boat.
Sorry, Michael- respectfully, John- that approach sounds interesting. The problem is that the intermediate price reductions, until they hit reality, screw up reality. Are you doing them daily, weekly? We all need full perspective- thanks. Again, sorry Michael, but your post brought up GREAT perspectives- thank you.
I have seen people using high list and drastic price drop as a marketing strategy. I should call them to see if it's working...I don't think it is.
I never tell a Seller what price they can get, I give them a range and tell them the market will determine the price. If they don't get 2-3 showings a week, it's overpriced.
Oh it's working Lania. If your goal is to make it appear home prices are crashing left and right and people are selling their homes for far less than they are worth. Playing games with prices to appease clients as opposed to spending the time to show them the true value of a home is hurting the market, and in the end, it's hurting the very client it's being done for. I've had many clients not even want to see a home thats had such a huge reduction because they feel there must be something wrong with it.
At the end of the day it's essentially worth what the bank will loan on it, and that will be determined by a licensed appraiser. Like it or not.
I give a range too Christina, and I don't tell anyone what to list it for. I give an expert opinion based on my experience in that area. I give them a high and low range, and I assure you it's not going to vary by sixty to seventy thousand dollars, unless of course it's a home valued well over one million. On median price homes one should be able to narrow it down a bit better than that, and not just make a guesstimate and test the market. If thats the best you can do you may as well use Zillow!
I'm simply suggesting if a home is worth 740k and your client says "let's try 825K and see how it goes" and you say, "gee, alright, sounds good to me", your doing no one any favors. You hurt the market, the business, and even that very client.
Here's a good poem that may be germain, by Ogden Nash:
Drop the price
Do it twice
That'd be nice.
OK, I lied. It wasn't Ogden Nash. It was me.
Yes, and and we all know how well that worked out in California.
Buyers are listening to the doom and gloom about the housing market. Maybe sellers should listen as well and wake up and smell the coffee. Houses are still selling, there is just a lot out there to pick from.
Ironically, I just heard my cell phone beep so I checked an incoming email. It says:
"HUGE PRICE REDUCTION!!!"
Michael
Good post. Did you go over to Joel Burslem's blog today? Great and funny piece.
Even if I do end up doing a price reduction---it is NOT an angle to use to market the property. All it really says is "no one wants this cr*ppy over-priced property.
You can reduce them, it is part of the new market--but it hurts the desirability of the property to announce it like it is some great thing. Quite the contrary.
No, I haven't read his post but I'll check it out. I suspect some agents lead clients to believe they can sell their homes for an absurdly high price just to acquire the listing. Then after it gets no views for a week or so they blame it on the market; they then show them more representational comps and get them to drop the price by a small fortune. Sort of a bait and switch.
Obviously price reductions do have their place in the industry but on the average home it's in increments of 10k, not 30, 40, 50, and 60k. I got a flyer one day claiming a $95,000 price reduction, as though I had just won a free trip or something.
Sadly many quality homes sat on the market through the summer months with insanely high prices and got lots of views, and lots of snubs. Now they drop the price to what it's actually worth, and now it's cold and rainy everyday. Now their open house produces no viewers.
Often if a client is insisting on an unrealistic price they don't say "Thats what it's worth." They say "Thats what I need to get for it". Usually, if you take the actual value, add in closing cost and commissions, it will come to about what they "need". They want what their home is worth, and they want it in their pocket. Their crazy price wasn't pulled out of the air.
I understand they feel they can do this because it's been done for years and worked. People did pay more than a home was worth, and bank's handed out the cash like it was free. But, as I said before, that boat has sailed.
I also wish it hadn't, but it has. That's just the way it is.
"I got a flyer one day claiming a $95,000 price reduction, as though I had just won a free trip or something."
You're cracking me up!!!
It is true that if the sellers price higher than the comps right now, they will more than likely sell for less later. Chad did some stats recently on a condo complex and amazaingly all of the 6 or 7 that sold recently sold at the same price, regardless of asking price. $269,000 sold for $275,000 bid up in a week or less. $289,000 also sold for $275,000 after reducing from $299,000 to $289,000 and being on market 70 days or so.
The market almost always flattens out in the last quarter though. The real story will be told come 1st quarter and 2nd quarter of 2008. Until then, no one really knows anything.
Kevin,
I'm with you. Just put the new price on and leave the trumpet with the band and cheerleaders. Hate those PRICE REDUCED! riders.
When business was booming I saw many agents use the strategy of pricing homes in exclusive area's far below market price, then setting an "offer review" day. It would get tons of people looking at it and offering because it was a great deal.
On one such home the agent I spoke with had over 100 offers, all with escalators. In the end such listings not only sold for more than the asking, but often more than it was worth. Seemed as though it created a competition of sorts and people's vanity drove them to win the bidding war. It also made it appear prices were skyrocketing at a pace greater than they were, even though that wasn't really needed.
In regards to the current trend of overpricing then quickly dropping the price drastically; I just feel that when you miss the mark by up to 95k on a home priced under 500k, your really not even trying to price it at market value. You then create an image to buyers that the markets backsliding, when it's really just slowed down a bit.
I think with a little effort we could do more to encourage clients to list homes with prices representational of actual market value.
Michael: There are various schools of thought on this. One would be that prices are rising and that we are not psychics another might be if not me than somebody else. If you can't get the listing, you can't get a price reduction! I have not seen a top producing agent in this market that did not have atleast a few overpriced listings.