06/04/2014
Price reduction paralysis.
Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.” But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.
In cases of overpricing, many sellers start out as overconfident in their home’s prospects on the current market. But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined. This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast.
Unfortunately, this panic is often accompanied by a fear that reducing the home’s list price will kick off this snowball effect. As you and I know, this couldn’t be further from the truth. When a home is dramatically overpriced, cutting the price is the only way to fix the scenario and render the home more compelling to buyers. If you’ve been around the business for awhile, I’m sure you’ve even seen cases in which a price reduction causes a listing to hit a sweet spot where it receives multiple offers and sells somewhere between the reduced price and the original list price.
But sellers who cannot manage their fear and panic often end up paralyzed, unable to cut the list price. And this begins the snowball effect of more and more days on the market, which aggressive buyers watch until they believe the seller’s desperation will make them amenable to a lowball offer.
The best way to help neutralize this panic is to work with your seller to put a price adjustment action plan and timeline in place before it ever arises. If you’re taking a listing you believe is overpriced, tell your client that, brief them on local DOM data and get them to agree up front to set up a timeline for making price reductions, if the home stays on the market significantly longer than average DOM.
