When you met with your sellers during the listing appointment, you agreed on a listing price for the home. You may have felt that it was priced competitively with the neighborhood, or more likely, you thought it was a little overpriced but didn’t want to argue with the seller. You wanted them to like you, right?
Now, however, after a few months on the market, the home isn’t selling and interest from buyers has slacked off, even while other homes are flying off the market. In a perfect world, your listing would have sold for the asking price, or even more, and in record time. In reality, it’s priced too high for the market and you’re going to have to get a price adjustment.
While no agent in their right mind looks forward to this conversation, it does provide you with a great opportunity to showcase your professional skills. If you do it right, you’ll not only get a better price, you may actually get the sellers more on your team than ever before.
Here’s how to do it right.
1. Stay in touch with your clients. The price reduction discussion begins long before there’s even a need for it. It starts with the listing appointment and continues with weekly contact. There’s nothing a seller hates more than not hearing from the listing agent for weeks, then, when they finally do hear from them, it’s for the agent to beat them up on price. Weekly contact is a must, even if there’s nothing new to report. With each call, you’re building trust and exhibiting your professionalism. If you’ve called them every week to give them an update on their home, they’ll be more likely to understand that, in order to sell, the price needs to be reduced. Will they be upset? Probably. At least at first, they may not like what you have to tell them, but in the end they will understand that you have their best interests at heart.
2. Meet with your sellers in-person. No one wants to hear this kind of news over text or email, especially if they’re emotionally invested in the home, and what seller isn’t? Schedule a time to meet with them in-person, and explain why you think the price should be reduced. Face to face, you can better judge their reaction, respond accordingly, and it’s easier to smooth ruffled feathers. They’ll also appreciate that you took the time to discuss the reduction personally rather than over text, email or the phone.
3. Explain why the change is necessary. Your sellers will want to know why you’re suggesting a price reduction. Don’t apologize, even if you suggested the original price. It’s not your fault!! Don’t be defensive. Just calmly explain the state of the local market, and reassure them that price reductions are sometimes necessary in order to compete. In fact, according to the National Association of REALTORS, more than half of sellers who had their homes on the market for 5 weeks or longer reduced their asking price at least once.
4. Rethink your lingo. Besides keeping a positive attitude, it’s also important to adopt language that will convey your message without anxiety. Don’t call it lowering the price or even a price reduction, call it a price adjustment. “Price reduction” kind of implies you’re reducing the value of the home, which can make the seller feel anxious or angry. A price adjustment is a more neutral term that doesn’t prompt an emotional response.
5. Thank them and reassure them. Make sure you tell the seller they are doing the right thing, thank them for being such great clients, and reassure them that you will redouble your efforts to get their house sold.
Here’s an example of how your conversation could go: (Remember!! This should be in person!)
Agent: Bob and Mary, when we put your house on the market, we chose a price that seemed to make sense as a starting point to getting it sold. Do you remember that we looked at the prices of homes that had sold and that we would be competing against?
Seller: Yes, we remember. And you said we should list a little higher than the others to see if we could get more.
Agent: You’re right. I did say that. And we tried. But after 5 weeks on the market and 15 showings, here’s what has been happening with homes sales in this market. (show them a current CMA if it supports a price reduction by showing price drops in the competition, houses selling a less than your listing, etc. If a CMA doesn’t support it, use this dialogue instead: After 5 weeks, and 15 showings, it looks like we’re just not attracting the right kind of attention.) So. You can see that the market just doesn’t seem to support our asking price. That could be for a number of reasons: 1. Something might be wrong with the house. We know that’s not the case because the feedback we’ve gotten has been very complimentary to your house. (If that’s NOT the case, use this as an opportunity to address any negative feedback you’ve received.) 2. Something is wrong with the way the house is being marketed. (Review with the seller the marketing activities you completed – from MRIS to facebook to open houses. Don’t forget realtor.com, Zillow, hundreds of cooperating websites and other sources that post our listings automatically). With all that marketing I’ve done, we’ve generated 15 showings in the past five weeks. That’s more than most houses. But still, no contract. 3. We may not have the right price. When we have a great house that is being thoroughly marketed, we have to suspect that the market isn’t responding to our price. Based on the new information I’ve shown you about sales and competition around us, I believe we need to adjust the price. When we make a price adjustment, we generally have to make one that is significant enough to catch the buyers’ attention. I would suggest $________, but no more than $________. Which do you want to go with?
Seller: I think we should just sit tight. We’re not in any hurry.
Agent: I understand how you feel. I’ve worked with lots of sellers who have felt the same way and decided to hold on to their asking price. But what they found in the end was that the price at which they sold ended up actually being much less than if they had adjusted their price in the first place and just stuck to their guns a little tighter through contract negotiations. Here’s why: What does a store do when a product – maybe a suit or a dress – doesn’t sell at a particular price?
Seller: They lower the price. But my home isn’t exactly a suit, is it?
Agent: No, you’re right. It’s not. But we have to consider the way a buyer is looking at this, too. The day we put it on the market, your house became a product – a kind of merchandise - to the buyer. It’s one of many houses they can consider. And, they will take into account, condition, location, and… price. Agreed? So if a price isn’t working, it’s the same as with any merchandise. The price has to be adjusted. In fact, the National Association of REALTORS says that 62% of the time, if a house is on the market five weeks or longer, the sellers make at least one price adjustment. I know you want to get your house sold before the holidays. The best way to do that is to adjust the price. Should we get started today?
