Price Reductions: The Bottom Dollar Script Page 1

Price Reductions: The Bottom Dollar Script Page 1

Price Reductions: The Bottom Dollar Script Page 2 Price Reductions: The Bottom-Dollar Script for a Guaranteed Sale By Tim & Julie Harris We ve been enjoying a recovering, healthier real estate market in recent years, but unfortunately, all signs point to a looming market downturn. Although many of you may be starting to see this market shift and feeling like you re staring down the barrel of a gun for the first time in your real estate careers, please don t worry. As we tell all of our coaching clients, When the going gets tough, the smart leave. Agents who can t weather the storm will get left behind, leaving more opportunity for you to increase your business and income stream. However, it s not enough to go into a recession with a strong mindset. First, you must have a strong skill set. Improving your skill set will make you more confident and able, thus giving you the strong mindset you need to get through tough times. It is easier to be successful in a real estate market downturn when you have the skill set others don t have, and the ability to help people out of the tough situation in which they find themselves. You will need both a strong skill set and mindset to deal with one of the most common side effects of a real estate market downturn: Price reductions. Across the country, sellers may be forced to slash their asking prices in order to move their homes off the market. Asking your seller to consider reducing their asking price can be intimidating. Selling a home is not only one of the largest financial transactions a person will undertake in their lifetime, but it s also often very personal and emotional. But our price-reduction scripts can equip you to handle this daunting task with professionalism, expertise and courtesy or even avoid having to do price reductions at all. Avoid price reductions by pricing homes right in the first place It may be possible to head off price reductions at the pass by making sure your listing is priced appropriately from the start. Here are three specific strategies to use to make sure you are pricing your seller s home correctly: 1. Price the home based on comparables which are in slightly worse condition than the subject property. You re more likely to get competing offers if the home looks a tad underpriced. If you don t get multiple offers, you didn t price the home right. 2. Price the home to compete with price ranges for homes that are just under its comps. For example, price a four-bedroom home as if it is the nicest three-bedroom home in the same neighborhood or school district. This will attract all of the prospective four-bedroom

Price Reductions: The Bottom Dollar Script Page 3 buyers, but also three-bedroom buyers who previously convinced themselves that they would never be able to afford a four-bedroom home. They will be excited that they can actually afford the four-bedroom home, and you will capture more prospective buyers with competing offers. 3. Figure out what the seller s expectations are by asking what their bottom-line price is. Some of you dance around that question, but reality is, most people don t negotiate very often or have the stomach for it or want to host multiple showings. You do have the stamina for the process and know what s best for them. Sellers will often allow you to be more aggressive on price if it eliminates some of their stress. Facing price reductions: What have you done for me lately? Sometimes, however, price reductions are unavoidable. When you ask a seller to reposition a home to a lower price, they may feel like you are personally attacking them and that can be a scary proposition for any real estate agent. Imagine you have something for sale right now, and suddenly, someone offers you half of your asking price for it. Even the most emotionally stable buyers are likely to get upset and want to attack you in some way and demand, What have you done for me lately to sell my house? There are a few ways you can respond if a seller demands this of you, depending on the individual situation. National Association of Realtors Price-Reduction Script A great place to start is this price-reduction script, which is based on statistics from the National Association of Realtors (NAR): We ve had views online, calls on our home hotline, showings and offers so far. According to NAR, if you haven t had an offer within two weeks of listing the home for sale, or 10 showings, you are missing the market s expectations. Notice we did not say, You need to reduce the price. Sellers usually overprice their homes for ego-related reasons. They think their home is worth more, simply because it s theirs. Your job is not to Dr. Phil them, but to work around these psychological obstacles so you can accomplish your goals. Thus, we recommend using phrases like: Let s reposition the house on the market to correctly reflect buyers expectations. A short and sweet response to What have you done for me lately?

Price Reductions: The Bottom Dollar Script Page 4 If you try to use the NAR price reduction script, and a seller still puts you on the spot about what you have been (or in his mind, what you have not been) doing to sell his home, you can always counteract an upset seller by pausing, and calmly responding this way: I am doing the things I have always done to sell the homes I have always sold, but we need to discuss the market s reaction to your home s current asking price. It is time to adjust it so it more accurately represents the expectations of buyers who are looking for a home like yours. Many times when we have used this script, something strange happened: The seller would actually call us, and say, Well, I guess it s time for us to come down 5 percent. Script: Why aren t you showing my home? Some sellers may further attack you and criticize you for not being present when showing the home. Here s your response: Mr. Seller, I appreciate you asking that question. Here is a simple fact: I may not be the agent who is always showing your home, but I am the reason it is getting shown. You hired me to complete my marketing plan, and part of completing the marketing plan means I am spending the majority of my day doing whatever it takes to get people to your home. That s the reason you are getting showings. Some other sample scripts Mr. and Mrs. Seller, we have done three showings, had 16 inquiries, done 2 open houses and we ve been on the market for 35 days. I m concerned, though. Can I tell you why? When we put your home on the market, you said you needed it sold by Aug. 1 because you want to relocate to Atlanta before the kids start school. Is that still the case? If so, we need to revisit the price so you can do what you need to do in that timeframe that makes sense for you. Mr. and Mrs. Seller, as you know, we have been on the market for a while now. I have had a lot of inquiries about your home, but sometimes, they don t turn into a showing. I just wanted to ask you, would you consider a price of? Never say take, or the seller will shoot you down. Use consider instead. You could suggest a very low listing price to test the waters and see if the seller freaks out. Let s say the listing is priced at $499,000, and you ask the seller if he would consider an offer of $465,000, knowing that it should probably be priced at $475,000. If he freaks out and says, There is no way I could ever accept something that crazy, you then suggest $475,000. If you start too high, you can t keep testing what he will actually be willing to accept. It has to be below the current list price until you get to a price he will at least consider. You: If you will consider a price of $475,000, why are we priced at $499,000?

Price Reductions: The Bottom Dollar Script Page 5 Seller: Well, do you have an offer for $475,000? You: Buyers don t think they have a shot at the price when they don t think they have a chance of getting anywhere near that price. You: Well, I don t want to give it away. Seller: Nor do I. Remember, I d like to sell your home for $1 billion! I only get paid on commission. Actually, you couldn t give your home away, even if you wanted to. Let me explain. What do you feel is your give-it-away price? Let s say we price it at $450,000, something really radical. What would happen to our showings? Seller: People would probably go crazy. It would look like a real steal, like we were giving it away. You: That s right, and it would likely create multiple offers. And when there is more than one offer, does the price typically go up or down? Seller: Up, I guess. I see your point. You: Our goal is to get the highest number of qualified buyers to see the home. The more activity we have, the better price we can bring you. Pricing your home is more of a marketing technique than a determination of value. Ultimately, your home is worth what a buyer is willing to pay, and what you are willing to accept. You can always accept, reject or counter any offer. Right now, we have nothing to negotiate. I recommend a new price of $475,000, so we can stimulate the activity necessary to bring a sale. What are your thoughts? Consider telling the seller a story to illustrate why price is so important: You: Mr. Seller, I am going to tell you a quick story. Last night, Julie and I pulled into the grocery store, and I ran in to get a gallon of milk while she stayed in the car with our baby. I walked all the way to the back of the store to the milk cooler, and saw 20 different brands of milk. Most of them had the same expiration date, size and quality; some were organic or in glass containers but they all looked more or less the same. Then I started looking at the prices, and I saw that they were not the same at all. Ultimately, I decided that price is what mattered the most to me, so I grabbed the milk with the lowest price. But then I had to get in a really long checkout line, and no one would allow me to cut in. Mr. Seller, people act the same way when they make buying decisions about any product, and this is how people view homebuying, too. Whenever people have a choice between similar products, they are going to choose a product that is priced the lowest. Mr. Seller, I have brought with me all of the comparable homes listed for sale that a prospective buyer in your neighborhood might consider. I have organized them in order of price. Knowing these houses are all the same four bedrooms, two-and-a-half bathrooms,

Price Reductions: The Bottom Dollar Script Page 6 similar yard size to yours, same age group, same square footage, same basic amenities which homes do you think will sell first? If all of these homes are shown in the next 30 days, most likely, the first 10 homes on this list, the lowest-priced homes, will be first to sell, then the next group, and the next one. Your house is listed down here in the third or fourth price bracket. So realistically, based on buyer behavior, if we do not make a price adjustment, your house will take six to seven months to sell based on the currently available inventory. Does this fit with your plan? Seller: No, I need to sell sooner. You: All we have to do is reposition the house in the market so we are in that first group. We know we will be in the group where houses have the best chance of selling first, and reflect the best value to buyers. When you give this type of information to a seller and walk though how the whole process works, you are both logically and emotionally on the same page. You: Mr. Seller, when we re putting your house on the market, whether it will sell comes down to three things: Price, condition and location. Location, we can t do anything about. Your home is where it is, and we can t move it. Let s talk about condition. Are you planning on doing any remodeling of the kitchen, adding a bathroom, building a new garage, putting in a new pool or making any radical changes to the home? Seller: No. You: And you probably don t need to, so that s fine. That means the only thing we can have a positive effect on, Mr. Seller, is the price. We can affect our results by having a position on the market so that when buyers are looking at the MLS, they can choose by price range. Buyers generally don t look at a house that is priced higher than what they can afford. They want to see things at or below their price range. So if we can t change the location or condition of the house, we have to reposition it on the market to more accurately reflect buyers expectations. How to deal with an unmotivated seller If, after using these scripts, the seller is still being difficult, this usually means the seller isn t really motivated to actually sell the home. Then it doesn t really matter what you say; the seller isn t going to listen to you. The most demanding clients expect you to work miracles, but the truth is, there is no pricereduction script which overcomes a non-motivated, unrealistic seller. When you first talk to a seller, you need to find out why they are selling, and when they need to move. Ideally, this will come out when you use your pre-qualification script, before you even go to the listing presentation. None of you should ever show up to a listing presentation without knowing why a seller wants to sell, and his timeframe for getting the deal done!

Price Reductions: The Bottom Dollar Script Page 7 Remember these equations: Motivation + timeframe = Better price Lack of motivation + no particular timeframe = Seller s pricing, or overpriced Focus your best efforts on sellers who actually want to sell. And if you find that your seller isn t serious about selling, offer your property management skills instead. Perhaps leasing in the short term will get the seller in a selling mindset in the near future and then you will be able to list the property at last.