So you get the listing appointment, work your charm, present your case, and even after all the data the seller wants to knowingly overprice their home.
What do you do? Do you take it? Is it worth the stress and blemish on your reputation?
Before you bail, know there's a solution that's a win for both sides. It's called the Pricing Adjustment Schedule.
This is a way to satisfy your seller's pricing demands while at the same time letting the home settle into the appropriate price point. In my experience, it's the only scenario when you should take an overpriced listing.
How I Know This Works
In the early days of my career, I definitely took a lot of overpriced listings and it was 50 percent because I didn't know that I was overpricing homes because truthfully, I wasn't that good at pricing. The other 50 percent was because, the truth is, I wasn't that good at negotiating.
Even being older, wiser, and more experienced, convincing someone their biggest asset (and the place they call home) is worth much less than what the Zestimate said is still a tough mission.
This article is for what comes after you've presented all of the data to a seller and they still want to willingly overprice their home.
Reasons to take listings:
We all know you have to list to last, and one thing that my friend Michael Hellickson (Club Wealth CEO and mega agent) always says is “a sign in the yard beats a sign in the car every time”, and I completely agree.
- You'll get sign calls and buyer leads.
- You can hold open houses and get buyer leads.
- You can market it online and get buyer leads.
“A sign in the yard is beats a sign in the car everytime.”
– Michael Hellickson
I'm sure you see where I'm going with this… Listings have always and will always be the best way to generate buyer leads. Just ask Zillow 😆.
Why you shouldn't take overpriced listings
Some real estate agents say that you should never take an overpriced listing. Saying every day that it doesn't sell you'll look worse to both the neighbors and other Realtors. Those other Realtors are going to know you overprice homes, willingly or not, and that you don't know how to handle an unrealistic seller. Plus, don't expect any calls from the neighbors.
The best reason that I think real estate agents shouldn't take overpriced listings (without using this strategy) is that problems arise when expectations differ. So unless you are very adamant about the fact that it's overpriced and they're willing to risk sitting for a while with no offers (or worse), they're going to start to hate you a little bit more each day.
And that's what happens. If you don't sell it, they'll eventually break up with you and ultimately hate you… OK, hate is a strong word but they won't necessarily like you a whole lot and we all know how vocal people are when they have a bad experience. They're going to tell people “yeah, he listed my house and it sat on the market forever and he couldn't sell it…”
Of all the traffic that occurs during the first 30 days on the market, over 50% of that traffic occurs within the first 7 days.
– Zillow Marketing Report 2017
I don't know about you, but that sucks and I definitely don't want a bad apple out there because a property was overpriced, regardless of the fact that seller was “unrealistic”. Everyone is unrealistic, it's human nature! Plus, they're not the professional home sellers. They're not trained in the art and science that is real estate. It's our job to educate our clients, especially when it comes to down overpricing a listing.
When it's OK to Overprice
I believe the only time that a realtor should take an overpriced listing is when you have a price adjustment schedule in place.
Price Adjustment Schedule
So there are two keywords that I want to kind of focus on. And the first one adjustment. I want you to remove the word “reduction” from your vocabulary and replace it with “adjustment”. From now on you'll refer to reductions as adjustments. Got it? Good, moving forward.
When we adjust the price of a real estate listing, we're doing so because of the market response (or lack thereof) so, we're adjusting the price to elicit a better response.
The next important word in Price Adjustment Schedule is the word schedule. It's important because it implies that there is a strict itinerary or schedule to the price adjustments. This is a simple, one-page form. We even made a beautiful template that you can download at the bottom of this post.
So what is a Price Adjustment Schedule?
The concept is simple. You both agree to gradually lower the list price after a certain number of days/showings until it reaches your originally suggested list price.
You'll need to be savvy of your market to know what numbers are reasonable, but the overall idea is the same.
Set the base price as your originally suggested amount and work your way down. Adjusting the price frequently will also work wonders for the listing exposure online because it will continually be getting refreshed and added to the “Recently Updated” Or “Recently Reduced” list.
So here's the script for explaining it:
“Hey Mr. and Mrs. Seller, we went over all the data, I showed you what the current market says your house is worth, but understandably you still want to list it high. Based on recent activity, we know that the market is not supporting that price, but if you still want to try, I, of course, want you to get the most money as well.
So here's what we can do. I'm willing to list your house at that price under one condition – we put a Price Adjustment Schedule in place.
Right now, statistics show that if a home isn't generating offers within __ days, or after __ showings, then it's overpriced. So every __ days or __ showings, we're going to adjust the price until we get to a more accurate market list price.
We're not going to keep reducing your price all the way down to zero if it doesn't sell. No, we're going to keep adjusting until we're generating more activity and more offers. How does that sound?”
Let's say a seller wants to list at $350,000 but we know that the house will sell closer to $325,000. You would let them list it at $350,000 then every 10 days or 10 showings (whichever comes first) that we don't receive an offer, the price gets adjusted by $5,000. We do this every 10 day/showings until we're at that recommended $325,000 list price.
That's a price adjustment schedule. You have an adjustment in the forecast, so it's better than listing a house and then two weeks later having to update your sellers and tell them there's no offers and no showings.
Wouldn't be so much better to have set that expectation upfront so you can call your sellers at the 10 day mark and say “Hey, Mr./Ms.Seller, it's been 10 days, or hey, we've had 11 showings and no offers yet, so I wanted to confirm that we're going to go ahead and adjust the price by $5,000.
That is the only time you should take an overpriced listing.
And if for some reason they don't like the idea of price adjustments and you know it won't be a win-win relationship, the best line I know for turning down the listing is “Sorry, but I'd rather turn you down than let you down”.