You helped stage the home, you organized an impeccable open house, and you set an accurate listing price after completing a thorough comparative market analysis — but the house isn’t getting much interest.
Sellers have a lot of emotions bound up in their home, and they can get touchy when the market tells them their home isn’t worth what they think it is. Worse yet, they may blame you for not selling it already.
Continue reading for tips on how to start the price reduction conversation with your client, how much to reduce the price, when to reduce it, and a lot more.
Set the groundwork early
Sellers probably have no idea they’re overpricing their home. Even if they do, they might be clinging to hope that a deep-pocketed buyer will fall in love with the place and snap it up. Or, they may think we’re still in a market where homes have multiple offers and sell above asking. You, as an agent, know better.
As soon as sellers set a price you recognize as too high, set up the possibility of a future price reduction. Assure them that you’ll list at their suggested price and that you’ll do everything you can to sell the home at that price. But if it doesn’t sell, you should all revisit the price in a few weeks and consider any necessary reductions.
Don’t tell them — help them decide
When you talk to a doctor about undergoing a medical procedure, they don’t tell you what to do. They simply go over all of your options, explain the positives and negatives of each one, and then give you the opportunity to make your own informed decision.
This is how you should approach pricing — and price reductions — with sellers. Avoid suggesting any numbers. If the home doesn’t sell, you’d “own” the failure.
Even if a home sells right away, the customer may feel like you set the price too low, costing them money, leading to serious regrets. Show the seller the comps, suggest a general range based on market data, and let them make a decision.
Deliver a great experience
Every agent fears suggesting a price reduction, only for the seller to respond by saying it’s the agent’s fault the house hasn’t sold. This is likely just an emotional reaction, but if you’ve made any mistakes during the sale process, sellers may use those to pin the failed sale on you.
To avoid that fate, make sure you give your clients a true five-star experience. Tell them exactly how you’re going to sell their home, and then do it. From an exhaustive marketing plan, to staging, and showing, don’t give sellers any room to doubt your performance.
Ask the right questions
Try not to immediately ask sellers how much they want to list their home for. Nearly every seller will throw out a number on the high end.
Their price may be based on how much they think their neighbor’s home sold for, how much money they’ve put into the home, or what they hope the house will sell for. Once that number is out there, it may be tough to get them to budge.
Instead, ask questions such as, “How much did you pay for your home?” This will help them focus on the appreciation they’ve seen, which can lead to a more realistic conversation on price. Also ask how much they still owe on the home, which steers the discussion toward equity.
Highlight sold properties, not unsold
When you complete a comparative market analysis (CMA), it can include properties that are currently on the market. These properties are often at the top of the list and are commonly referred to as “active.”
These unsold properties can be an agent’s worst enemy, though. Those properties are often still on the market for a reason, such as overpricing, and you may not want to lead your list of comps with those unsold properties.
Some experts recommend calling these properties “unsold” instead of “active” to stress that they’re languishing on the market and not engaged in some kind of dynamic situation.
When you review a CMA with your client, start with comps that have already sold. That will set more realistic price expectations. After all, the goal isn’t to stay on the market. It’s to sell the house.
Remind them that the market sets the price
Some sellers may see pricing in confrontational terms. Will they set the price, or will the agent set the price? Others may take a more passive position, assuming that buyers set the price.
But none of those assumptions is really accurate. The market sets the price. Make this very clear to the client so the sale is a collaboration as you jointly set out to discover the market price, rather than some ego-driven contest on who calls the pricing shots.
Emphasizing that the market sets the price also makes any question of blame irrelevant. It gets them off the hook for overpricing in the first place, and you avoid accusations that the home didn’t sell at a higher price because you didn’t try hard enough.
Create a new CMA
The CMA you did when you originally listed the home is likely months old, and in times of market volatility, conditions can change quickly.
Leading with hard data from a fresh CMA will help you make an objective argument for a price reduction.
Don’t waste time
A home generally attracts the most interest in the first 21 days on the market. Don’t waste that entire window by letting an overpriced home sit on the market.
If the property hasn’t attracted much interest after 10 to 14 days, push for a price reduction to take advantage of that last high-visibility week. At that point, you’ve likely had two weekends of open houses, and you have a good idea of the level of interest.
If you wait too long to cut the price, buyers may assume you’re desperate to sell and submit lowball offers. By the same token, don’t reduce the price more than three times, or buyers will assume that the home has serious problems.
Reduce the right amount
With only three tries at a price cut, you need to make the most of each one.
How much of a price reduction will depend on how overpriced the home is. If it’s just slightly overpriced, a cut as small as half a percent could do the trick. If it’s significantly overpriced, you may have to cut it by 7% or more.
In general, experts suggest a price reduction of at least 3%. One good rule is to fall into the next lowest price bracket. If you’re priced at $415,000, consider going down to $399,500 so your home will appear in searches for homes under $400,000.
Remember, if the price is too high, the home isn’t going to sell, no matter how hot the market is. But if you and your client can hit on the right price, you’ll be signing closing papers in no time.
Luke Babich is the co-founder and CEO of Clever Real Estate.