Friday, February 3, 2012

Why Do Real Estate Agents Ask For Price Reductions?

So you have listed your home, and now a few weeks later your Realtor has called and suggested a price reduction on your home.  I find that most homeowners do not take to this well, but unfortunately the time or the need for price reductions can not be predicted by anyone.

Although I know many homeowners cringe, and feel as if their Realtor may have agreed to a listing price just to get the listing, this is not the case.  Realtors that do not care about their homeowners, and just wanted another listing will NOT ask for a price reduction they will simply sit by and do nothing.  If your Realtor calls you for a price reduction, listen to their reasons why, remember we do not control the market but it is our responsibility to keep you informed  about it.

In some cases when I take a listing, I will tell the homeowner that we will be discussing a possible price reduction in 30 days.  I do this mainly for homes that I know have a large amount of competition surrounding them. Buyers will know how long your home has been on the market and we don't want them thinking your home is lacking in value.  I prefer to be up-front wiht my homeowners this way they know we will be having frequent discussions about the market, and what it means for their home.

Sometime price reductions are necessary for these homes because,

  • The homes that were previously UC, sold at a lower price point than predicted by the closed sales of previous months.  
  • Large amount of other homes have come onto the market at a substantially lower price.   
  • Your home is getting views online but no one is calling to see it in person, this means you need to change the buyer pool.
  • Your home is getting alot of potential buyers in but no offers, it means you have the right buyers but you need to adjust your homes perception of value.  
This is usually tricky, homeowners don't always see the difference between changing your price to adjust the buyer pool, and changing your price you change your homes perception of value.

Changing Your Buyers Pool

Your buyer pool is determined by the overall price of your home, in the price range where you are what do the buyers expect to be seeing? 
If your home is priced at the higher end of a range than you should really take a look at your competition and see where does your house come in? 

You may not want to lose the money by dropping your price, but unfortunately if the market has changed you have already lost it and you have the chance to do "damage control" and adjust to market conditions.  

Changing Your Perception Of Value

This is the tricky part sometimes adding value to your home is something your Realtor can actually do for you.  Perhaps your pictures didn't show everything your home had to offer, or they may have additional services to offer buyers than they had not utilized.  I personally have home warranties on my listings, it is very important for those that have a lot of competition because it gives my listings added value.   Sometimes their might be something specific that buyers have an issue with, an example is a homes whose taxes are higher than the competition offering negotiate a "price adjustment" for qualified buyers.  

The Exception
Some homes after the 30 days, even if I haven't received an offer I will suggest that we DO NOT reduce the price.  Certain homes, are sometimes just in need of a particular kind of buyer.  This is usually the case in larger homes, extremely small homes like cottages, waterfront or beach-front homes, or new construction.  These homes are not "cookie cutter" homes, and it will be a very specific buyer so the value of these homes are quite different.

The one thing you have to keep in mind when you get "that call" is that your Realtor is working for you our job is not to just sell your home, it is to help you make good decisions about the sale of your home!  There are some cases where a person absolutely can not budge on their price for financial reasons, if that is the case be honest with your Realtor they may be able to provide you with other alternatives aside from just selling your home.

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