The Best Price Reduction Strategy for Real Estate Agents
Price Reduction Email and Script
Trying to find the best price reduction strategy as a real estate agent can be a challenge. Set yourself up for success with an email template and script to help your chances at securing a price reduction in real estate. Out of all the conversations you have with a client, price reductions can be one of the most challenging. Therefore, know you are not alone if you are shaking when dialing your seller's phone number.
Without a doubt, my voice has cracked once or twice during these conversations. I found them so tricky that I began to research every method out there to find a system and script that worked. I pulled from real estate trainers, websites, books, and I even cornered some top producers into a corner and asked them.
After much time and effort, I formulated a plan. Since using this plan, price reductions have become a breeze!
Pro Tips
· Use the words “market” and “positioning.” Saying the market is telling us we may want to be positioned in X range is much more convincing then “we should list here.”
· Explain to sellers that one property always helps sell another. This can bring out their competitive side as they do not want their home to help sell the one down the street.
· Ask a colleague for a pricing opinion. This takes the pressure off of you and switches the focus away from you asking for the reduction and adds credibility to your ask.
· Respect the seller! This is their property. You are here to help provide them with the information but they are ultimately in the driver’s seat.
Here is how I approach a price reduction
1) Set The Stage
Before you sign the listing contract, most sellers will ask you "The Question" - "What is my home worth?"
Now, we all have different methods of approaching this question, but it's crucial that you do not give an exact number. After all, how can you know what it will actually sell for?
You don't, and you are pigeonholing yourself if you do put a number on a property. So instead, I recommend the following language
"The market is pointing to an anticipated value of X to Y."
By saying this, you are not putting a number on the property, the market is. Furthermore, you are giving a market value range. Make sure your sellers know where this range is before listing the property. I like to put it in an email too (so they can reference it) with the following type of script:
"It sounds like you are hoping to list for above $500,000. Understand this is perfectly fine as long as we are prepared to move if the market does not support this price. We may have to move into the $490,000s if this is what the market is telling us. From there, we may have to move into our market value range of $465,000 - $475,000 to ultimately sell your property. Are you on board with this?"
- Note the seller now knows the market value, and you are asking if they are ok with this. Now that they know the market value let's say they list at $510,000.
2) Weekly Recommendation
All sellers should/deserve to hear from you every week. I choose Mondays for follow-ups with all my sellers.
If your seller is reaching out to you, you are failing them.
When I reach out to my sellers, I provide them with a market update, feedback, and a recommendation. I put this in writing, so they see every week that I am recommending a reduction. Usually the first week they brush it off, but after seeing this time and again, they will soften up to the idea of a reduction.
Time for The Formal Ask: Up to this point, your seller has been hearing/seeing your recommendation to adjust the price. You have tried with a high price because the last thing you/your seller wants is for money to be left on the table. Now it's time for the formal ask. Depending on your client's personality type, you can alter this accordingly. For example, if they are a High-D, keep it more direct. If they are a High-S, you will need to plug in stats.
Price Reduction Email
"I understand your concerns about price reductions; they aren't ever a seller's first choice.
Three things I watch closely before recommending a reduction:
1) Properties selling in the market
2) Action/Inquiries/Feedback around the listing
3) Market value of the property and Direction of the market
As odd as it sounds, reducing the price rarely leads to a lower accepted price. Instead, it is a proactive approach to be one step ahead of the market and lines us up to be the favourable choice in a market with limited buyers.
Reducing price can feel like money leaving your pocket when instead it is just putting us in a better position to sell. The market ultimately pays the price for a property at the value that it deems to be "market value." This is independent of the list price, but the closer we get to that market value number, the higher the likelihood of a strong offer coming forth.
Know that this price adjustment comes from a place of mutual purpose in selling your home for the highest possible price and I fully respect your decision."
Handling Objections
Objection 1 - "I don't want to reduce the price. Can't you just do a better job of marketing my home?"
My approach here is to say, "I can appreciate your concern with the price reduction. On the marketing side we have all hands on deck getting your property in front of the most number of people. We have X # of views, X # of impressions, X # of inquiries, ect. We have been very pleased with the response to our marketing campaigns but can you let me know if there is anything you think I am not doing to market your listing?" (This assumes you market your listings with the highest standard, which you better be!)
Another approach, "I can appreciate your concern with the price reduction. On the marketing side, we are seeing X number of views online, given this strong number, could it be possible the price is having an impact on why buyers are not booking showings. What are your thoughts?”
Always followed by "I am here to serve you and sell your home for the highest price! Please know if there is any way you see/think I am dropping the ball, let me know right away so we can fix it."
Objection 2 - "We have only been on the market for two weeks, let's wait longer before the reduction."
My approach: "We can certainly wait if you would like. The issue with accumulating several days on the market is we open ourselves up to low-ball offers and non-negotiable buyers. Given homes are selling in an average of X days on the market in your area, our sellers have had the most success with responding to the market promptly. If you would be more comfortable waiting a few days, that is perfectly fine. I will give you a shout in a couple of days, and we can chat further."
Objection 3 - "But this is getting close to where I want to be. This leaves me little negotiation room."
This should be handled at the start when Setting the Stage. If their expectations are way out to lunch, then you should re-evaluate taking the listing.
If I'm already in the bind, here is my approach: "I know we are nearing where you were hoping to be. Know that my job is to get you the most that the market will allow. Currently, the market is telling us we need to be closer to X range. Think it through for a few days and let's chat then. Either way, know that I am fighting to get you every dollar possible."
Conclusion
There are some crucial points to make when approaching price reductions with a seller. The seller needs to know you are doing this from a place of mutual purpose and respect. We make reductions because the market "speaks to us" and will let us know if we are priced too high. We recommend the reduction to benefit the seller and help them achieve the highest price possible.
Always respect your seller and always fight for them!
Follow Up Info: Tom Ferry Price Reduction, When To Reduce Price (The Balance)
Podcast Transcript:
[00:00:00] Hello and welcome to Rev Real Estate School. The podcasts with quick tips and actionable advice to help you sell more real estate in today's world. And now your host Michael Montgomery.
[00:00:11] Hello and welcome to another episode of Rev Real Estate School. My name is Michael Montgomery. Do you struggle with price reductions? These are not easy discussions to have with sellers and depending on where your market is or where it's going these conversations might become a little bit more important as time goes on.
[00:00:31] In this episode we are going to discuss an email that I send sellers when it is time for a price reduction. Now in this episode if you'd like head on down to these show notes because you can download the email directly and you can feel free to use it. We're going to go into what I say in the email and then the reasons why I put certain things in the email.
[00:00:53] First off you're going to notice that it is a email. The reason why I want to start with an email is because I want to provide a lot of information to the seller. I don't want to call them right off the bat catch them off guard and then throw a price reduction at them. I'd much rather send them an email with detailed information depending on their personality type, they might very very much need this in order to make a decision and then I always want to follow it up with a call. So right off the bat I'm sending them an email and I want them to take this information and think about it. Then that way when I call them we're prepared to have a real conversation.
[00:01:29] I'm not just catching them off guard and throwing a price reduction at them. If you've tried that before I find it doesn't land very well with sellers oftentimes they're like "Okay I get it I guess we'll talk to each other and we'll figure this out" and it's kind of just a little bit disjointed. But if you do send the email beforehand it just creates such an amazing conversation on the phone and they're prepared because they have the data.
[00:01:51] The power in getting the price reduction and in helping the sellers see why there is a need for a price reduction comes in the understanding that when a price reduction occurs what the sellers concern is is that there's money leaving their pocket. When we're going through this we really want to keep the list price and market value separate from each other. We don't want them to think that the list price indicates their market value. We want to keep market value and list price separate. You'll see this within the email how I'm trying to keep these two concepts different and how we're talking more about positioning.
[00:02:25] That runs into the next point. Two words that I use quite frequently when I am talking about pricing and price reductions are two things. Number one positioning. You want to position the listing and I want to talk to the seller about where they would like to be positioned within the market. Number two is just that word market. So it's not me that saying that this is what your place is worth. It's the market showing us that we could be a little bit on the high side.
[00:02:53] The next point is one property will help sell the other. So when the seller understands that if they're overpriced they're just going to help sell somebody else in their neighborhood. If they do have a little bit of a competitive side to them this can work in your favor because it's true if you have two identical properties the buyer is going to choose the one for the lowest price. If value is equal the buyer will always use this is just general buyers will choose things that are lower price when value is equal. So when sellers have an understanding of one property can potentially help sell another one then they start to think well we don't want to be that property that helps sell the neighbors down the street.
[00:03:30] Another great strategy is asking a colleague at your office for their thoughts on price. This can disarm the seller from thinking that it's just you that wants this price reduction so you can sell the listing you're bringing up other professionals that are within the industry as well.
[00:03:47] The final part is you will see I talk about respect about mutual respect. So I want to respect their decision. I'm there working for them. It is my job to help show them where the market is and talk to them about positioning and talk to them about comparables. But at the end of the day it is their decision. And I do respect their decision no matter what that might be. So that's where I will follow it up at the end.
[00:04:10] Let's jump into that email. I'll start with just some casual "Hi how are you" that sort of thing. And then when I jump into asking for the price reduction it goes something like this.
[00:04:19] I let them know that I think we may have to make an adjustment and I say three things that I watch closely before recommending an adjustment. Number one properties selling in the market. Number two action on the property inquiries feedback we're getting about the listing and then number three the market value of the property and direction of the market. I then move in to say as odd as it sounds reducing the price rarely leads to a lower accepted price. Instead it's a proactive approach to help us be one step ahead of the market and it lines us up in a favorable position to be the choice for buyers. Finally I say reducing price can feel like money leaving your pocket. But instead it's just putting us in a better position to sell after all the market ultimately pays the price for a property at the value that it deems market value. This is actually independent from our list price. But the closer we get to that market value no with our list price the higher likelihood that we will have a strong offer coming forward. That's it! I'm hitting on the fact that there are some statistics behind it's the properties that are selling. We're talking about feedback and market value. I'm also touching on the point that I know what their feeling is with the price reduction that reducing the price will lead to less money in their pocket.
[00:05:44] In the second paragraph you'll see as odd as it sounds reducing the price rarely leads to a lower accepted price. So I'm tackling that issue that they may have in that objection right off the bat. And then at the very end I'm starting to get into how this is independent from the list price. So the market value in the list price are two independent things and that is how I follow up and send them an email. Now the final thing that I do do is I say that this comes from a place of mutual purpose in selling their home. And I fully respect their decision. Finally this is coming back to the respect side of things that it is up to them. And then I ask when they're ready to have a quick call so I can follow up and chat with them on the phone so you can see the reason why I put this into an email is that it's just easier for them to digest this information to have a discussion and then we can jump on the phone a little bit later.
[00:06:37] Final tip here. When you are asking for a price reduction think ahead. Try to ask for the price reduction probably earlier than you actually need it. The reason is is it gives them time to let this sink in and to let them make a decision that works best for them. If I need a price reduction I know that I'm probably going to need one in the next week or so. I may ask for one a week in advance knowing that over the course the next week we're probably going to be discussing it we're gonna be chatting about prices we're gonna be chatting about comparables and that sort of thing.
[00:07:08] Ask for the reduction before you need it again go into the show notes for this if you would like to download the email directly if you'd like to use that. Thank you very much for tuning in and we will catch you on the next lesson.
[00:07:20] This episode of Rev Real Estate School has come to a close. Thank you for tuning in. We'll see you back here for the next lesson.
Follow Up Reading
Overcoming Perfectionism in Real Estate
When To Ask a Seller For a Referral
24 Books for New Real Estate Agents
Question: What are your tips for asking for price reductions? Let me know in the comments below.
-Michael Montgomery