I Keep Your Goals in Mind - Even When You Don't. Everyone knows that when buying a home, Buyers often get carried away with emotion. But you may not know (until you are in the situation yourself), that the same can be true for Homeowners when they are selling their home. On the day that their home is listed (nearly) every Seller would like to get the most amount of money possible. But oh how quickly that can change....
Right now I have 3 Sellers that are all in a similar situation. They all have been on the market for a reasonable amount of time. They all have had recent price reductions, and are priced either at or below comparable sales in their neighborhoods. All of the Sellers need these homes sold yesterday. As a result, all 3 of these Sellers would like to reduce their prices further.
I learned a long time ago, that in Real Estate, there is nothing wrong with a property that the price can't fix. And as nice as it is to have Sellers that are willing to reduce their prices, I also have to stick to the pledge I made as their Realtor - to get the most amount of money for their home, in the least amount of time, all the while looking out for their best interests and helping them achieve their goals.
With this in mind, I have told each of these Sellers individually that I cannot advise them to reduce their prices further. Some might think I'm doing this to get myself a higher commission, or to prove to my Sellers that our initial price positioning was correct. They would be wrong.
What it's about is how the market conditions have changed. Property is taking longer to sell than any of us initially believed, and there's a lot more competition. The best advice I can give my Sellers is to be patient.
As a Seller - you and I are on a Team. Our Team has a marketing plan in place. It was a plan we agreed to when we listed the home. We made the plan and agreement before emotions ran high. It's a plan that makes sense, accounts for your competition, and takes into consideration your goals. We need to stick to it.
Clients always ask me: Are you on the web?
See for yourself.
Tim McIntyre, GRI, Ellicott City Realtor, Catonsville Realtor
Helping Clients Buy, Sell and Invest in
Howard County, Carroll County and Baltimore County
for more than 25 years.
tmcintyre@cbmove.com 410-480-3555
www.timsellshomes.com
I think this is great! Very good approach. I too find that sometimes I'm advising against price reductions...because they need to get a specific amount and that's the problem. I suggested this for a feature because I think it's important to see that some agents don't just jump at a price reduction.
Thanks for the Feature suggestion. I agree with you - I think it's important that our clients realize that we make our recommendations based on serving their interests....not ours.
Hi Tim~ Many will say that price reduction is the answer, but when the comparables in the very same neighborhood are selling for more, you know it isn't the price!
yes that is right you have to learn to tell them to be patient. And you have to be patient too
Well Tim, if I need to get gone immediately, I know that price will eventually get me gone, yes? While the market is a mess (too much inventory, too few adaptable lenders, tough appraisers, too few buyers with substantial cash, etc.), when a client needs to go, why not allow them to push the price until they meet the market? Unless there is something else substantial that you can do to sell the house, don't we have an obligation to come up with something better than "hang in there"?
I find that sometimes we have to be counselors to help our clents take the emotion out of things and make a good sound decision.
Good Post!
You nailed it. With competition being under priced short sales sucking up alot of the buyers hopes andaggressively priced REO's--(good ones get multiple offers, bad ones become firesales). The resale homeowner needs patience and an open mind.
Thanks for the post today...
Patricia
Tim, sometimes you just have to wait for that right buyer to come along. Theirs is next! I am in that situation with a gorgeous home that just doesn't have any buyers because of its location, but it is at foreclosure pricing. I believe there will be a buyer but we just have to wait. Thanks for the affirmation!
Tim... You make some very valid points, when it comes to price reductions. I also agree about the emotions and such... but your title talked about goals and I thought you would have said something about this also. Unless you are interpreting the goal of selling their house for what they originally started with.. just a tad lost with the term goal then.. but overall, sticking to your guns is good, but at what price. Does the borrower take a chance on staying on the market longer then? Do they need to move that bad? That would be a goal to sell and move on then.. because another goal would be to get that low interest rate. We don't know where it will be 6 months from now. Just other pieces of food for thought... thanks
Hi Tim -- Good advice. Further, we also renovative, redesign and home stage homes in dramatic yet cost effective fashion so if sellers have additional funds, a dollar invested versus a dollar reduced almost always (in our market at least) will net the seller an overall higher profit, as well as reduce carrying costs with a quicker sale. It's a shame more agents don't increase the # of tools in the toolbox. There's more to selling a home than simply price and time. Looking at trends and staying ahead of the curve is also key.
I agree the sellers and us are a team. If you aren't then you can't help each other reach the common goal of selling the home. You need to work together, be keeping the house clean and show ready for the seller and you with your marketing. If one is missing, the other won't work.
Good point! And it takes a skilled professional to know when to hold 'em and when to fold. Kudos Tim,
I'm of the opinion that the answer depends on the sellers goals of money, time, and hassle. While there are many tools that we, as sellers' agents, can utilize, none come near to the impact of price reduction. I've had 2 experiences where pricing below market value actually attracts multiple offers and allowed me to negotiate the price up to market value as well as forcing buyers to compete on time and hassle as well.
When representing buyers who like a home, my overwhelming experience is that the first question is "How much?". The second question is always, "How long has it been on the market? Can we use DOM to our advantage?"
Personally I feel that sometimes a clients goals change during the process and if after discussing the reasons for the change of direction it is valid (at least to the client) then it is probably best to adjust to achieve the clients new goals.
If a client comes and says "We want out, lets lower the price." and we fight against lowering that price one could find themselves in a situation where that client drops them to find an agent that will provide them with the services they want.
Sorry, I disagree with your decision not to drop the price.
As you know, in a buyers market, your sellers and other sellers are competing for the limited number of buyers. If there are other sellers that are putting their houses on the market, it will affect the inventory, but likely not the number of available buyers. If your seller does not drop the price, but another seller does, resulting in a quicker sale (all other things being equal), what would your sellers think of you then?
The reality is that the price is set by the buyer, not seller.
Another reality is that you don't know (with all due respect) when the house will sell at the price it's listed for now. If the interest rates happen to go up, and if the economy goes further down, your sellers may have to drop the price even further down.
But with every month the house does not sell, comes another mortgage payment. So, if the mortgage payment is $1000/mo and the seller waits for 5 months to get 200K for their home, they would get the same net price as if they sold for $195K today. (Ignoring taxes, comissions, water bills, higher energy bills in this crude example).
Sorry to disagree with you here, but wanted to share my thoughts.
Way to stick to your guns Tim! I'm not going to say most...but a lot of people would shoot for the reduction to get paid sooner. I really appreciate the aspect of representing your clients best interest...even when they have veered off course a bit. Cheers to you for reminding them and giving them the encouragement they need. All it takes is the right buyer to walk through the door and that sometimes takes time.
It's an interesteing mix when sellers list their homes for sale. They have to show well, be clean, be neutral, and be priced in the ballpark. I'm a firm believe that if you follow the first 4 and you're in the ballpark, an offer will present itself in due time. Good post!
Hi Tim...hello, and if I might share same insights...I went recently through similar circumstances with clients here, "down under" in Perth, W.Australia.
First and foremost I had to ascertain the level of urgency to sell and the causes inflicted on economical, emotional factors if the properties did not sell within a strictly determined time frame.
Next, a analysis of motivational factors to sell was drawn:
Part of the solution would be to analyse,
A, if the seller/s would be staying, and to work then out the known strenghts, weaknesses and opportunities based on their very unique and specific economical, emotional circumstances - family support, personal and unit (family) endurance factors in stress situations,
B, when selling and buying in the same market to ascertain the losses....what is more important...to continue the journey without the daily stresses, to have the strength to leave the emotions behind and to wish the new owners happiness, or to stay muffled and suffer for days, weeks, months on end never be certain for how much and when it's going to sell....
To help closing a deal, in the past I tried a few sweeteners to the prospective buyer:
Some times if the commission was premium, and the seller really in need I offered to go half half...
Finally Tim, I read you...congratulations, you are truly a courageous and passionate agent to come forward! Remember...your clients TRUST YOU, they employed YOU because of your INTEGRITY, EXPERTISE, AND UNCONDITIONAL LOYALTY.
What they like, I imagine, is YOU to LEAD them, and that is to cross the Rubicon to victory...to sell the properties, that's why they placed their loyalty in YOU.
Good luck. Keep soldiering.
Namaste. Peter M.
I am going to agreee with # 17 above. You can give your opinion of the market all you want, but if the seller wants it sold today the seller should set a price that will sell it today, which can be pretty low.
Interesting and unusual debate to be having. We are in the summer doldrums here, and properties are moving much more slowly. So patience is important. But depending on the seller's needs to have it sold quickly, a price reduction could still be in order if it attains the goal of a quicker sale.
Thanks for all your opinions. It has been very interesting. I will let you know how things continue to develope with this one.
I agree with you regarding the seller's best interest. However, in my situation and what's best for the seller is a price reduction to stay competitive. Agents do not control the market. We collect information, present it to the sellers and make recommendations based on the information we receive. Some sellers are unrealistic and want to price their homes higher than the comps because they've made expensive upgrades or they may want a certain amount of proceeds received from the settlement of their home. Sellers have to be realistic and go with the facts. If your home is overpriced, it will sit on the market longer.
I've heard that for some products & services, you even have to raise prices to get the right buyers looking.
Doesn't the whole thing depend upon each individual situation?
How much will it cost them in extra payments, etc. if they have to wait a few more months to sell?
What other plans in their life are being put on hold while they wait? Will that cost them money?
Is their life already disrupted because one spouse had to go ahead and move for a job transfer?
Are they intent on being in a new city before it's time for the kids to go back to school?
Just things to consider...
It just shows that sales come down to: price, condition, location. You can market until the cows come home.. but: p c l...
I agree with all those who have said that the priority of the goals is the most important thing here. It seems as the sellers priority is for a fast sale and there is no better way to do that than to price it competitively. I hope that you don't wind up getting stale on the market and having to drop even further that what the sellers wanted just to get it sold later.
Good luck to you regardless!
Tim,
http://www.freddiemac.com/sell/factsheets/temp_sub_buydown.htm
If you take a look at the above link, it discusses temporary buydowns. In a previous life a lonnnnnng time ago, we used them in exactly these kinds of situations!!
Here's what happens:
Example A:
The seller needs to sell, and wants to reduce the price from $189,900 to $175,000. In their mind, this will create a stir in the marketplace...and buyers will come flocking to their door with an offer. But here's the problem. If the buyers are buying FHA, the downpayment difference is only $500.00, and the monthly payments only drop by $50.00. It doesn't really increase the pool of qualified buyers at all! They still have to market to exactly the same people as they WERE marketing to....except that now they're gonna lose $15,000!
Example B:
Seller keeps their price the same, but offers to help buyers with their monthly payments for the first 2-3 years. To do this, they contribute an amount equal to the amount of the payment savings, and it goes into a buydown account, which the buyers draw from monthly. For example, if interest rates are 5%, the buyers might get a 2-1 buydown which means they pay 2% less the first year, 1% less the second year, and then finally at the note rate of 5%. That two percent savings the first year would equal somewhere in the neighborhood of $305/mo. difference in their monthly payment! OVER THREE HUNDRED DOLLARS A MONTH!!! Plus, they get to qualify at the lower amount, meaning that the pool of qualified buyers just went up a TON!! Your sellers total cost??? $5,500 (NOT $15,000!!) They make $10,000 more, their home sells faster, and you're the hero (you can even advertise the property as "Sellers will help with your monthly payments for two years!!") Trust me, you'll get responses!
Here's where it gets complicated. (Ugh)
Not having been in the mortgage industry for 20 years, and having asked countless loan officers who have never used them (they were more popular back in the day when interest rates were much higher)...no one seems to know whether they're still available!!! Freddie Mac says yes, and I believe so do Fannie Mae and Ginnie Mae, but it may take some work finding a loan officer who 1.) knows about them or 2.) can verify whether they're still sellable in the secondary market.
They worked like a charm back in the day...and I think they'd still be useful now for precisely the situation you're in!!
Let us know what you find out from your loan officer, ok??
Dave
These homes have all reduced prices in the past 30 days and in my opinion any further reductions are just not warranted. It always comes down to location, price and condition however patience is also needed in and up and down market.
Great post. From the sellers point though you have to remember it's hard to focus on clearing the swamp when you're up to you tush in aligators and it's equally hard to focus on the correct price for your property when it isn't moving as fast as you need for it to happen.
Great thoughts and blog.
Concise well delivered information and slant on the issues.
Great post!! We neeed to have confidence in ourselves and our skills as the Professional.
It helps to reassure ourselves and our clients when things don't go as planned.
Tim,
I have a similar sitaution with one of my listings. We just need more qualiifed buyers!