24 August 2010 ~
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Getting Price Reductions in a Declining Market

Getting Price Reductions in a Declining MarketSometimes it is necessary to “reposition” your listing in the market by making a price reduction. Make the job easier by setting the stage for the adjustment at the listing appointment.

Script:  Mr. and Mrs. Seller, we are going to price your home today based on the last three comparable sales in your neighborhood. These are the same three sales that an appraiser will use to value your home once the property sells. However, the market is not static. It is always moving either up or down. If we price your home competitively, it could draw multiple offers and sell for above the list price. If the market is trending downward, we may need to make a price adjustment to reposition your home in the market. By doing this systematically, you’ll have a much greater opportunity to be the next home sold. A home will draw an offer if it is priced within 10% of its true market value. Every two weeks, we will make a 3% price adjustment until your home sells.

Write into Special Provisions of your listing agreement “The list price of this property will be reduced by 3% on the 1st and 15th day of each month until the property sells. Each time the list price is reduced, the term of the listing is extended by two weeks.”  Begin the term of your listing on the 1st or the 15th of the month.

Three days prior to each price reduction, send your seller a “Quick CMA” as part of a Market Report showing activity on their home. These can be prepared easily by using “saved search” information in the MLS and emailed to your client.

The Market Report is a powerful tool.  It can be designed so that all of the activity for the listing is tallied on one cover page. It reports Days on Market, Market Activity (Actives, Pendings, Solds), Prospecting Activity, Internet Viewings, Hotline Calls, Physical Showings, Offers and the Responses from Homefeedback.

Attach any cumulative reports you have for the listing to the Market Report. The HomeFeedback System has a great report to convey feedback from agents who have physically showed the property.  The listing agent can write a short list of feedback questions, and they are delivered to the showing agent automatically by email after the showing. There is also a place for the showing agent to write a comment. The answers to these questions are tallied and bar graphed in a cumulative report, and makes a good tool for reporting feedback on price, condition and ease of showing.  Realtor.com also has a good graph report of “virtual showings”. The listing agent must have the listing enhancement of their program to get the report, but it is worth the price of the enhancement feature just to get this report. Most single property website programs have good reports that show the number of visitors to the site and what features of the property were viewed. These reports are valuable attachments to the Market Report, and are useful in getting price reductions and offers accepted or negotiated with the seller.

Use the Automated Home Search feature through your local MLS to sign your sellers up for a “home search” in their neighborhood. Each time a home comes onto the market or goes pending in their neighborhood, the seller will get the notification.  It gives them real time knowledge about the market activity. Copy yourself so you will know when they do.

Sellers complain most about pricing and communication. By setting systems in place for calculated price reductions and providing frequent reporting, you’ll get your listings sold while others’ listings are expiring.

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