What Overpricing Costs; Timing a Price Reduction – Agents Advantage Real Estate Academy

A list price above the range the sales support is a decision a seller is entitled to make, and the office records it as the seller’s decision with the agent’s recommendation on file. What happens next is not left to chance. A listing priced above its range produces a pattern of activity that can be measured against the segment, and the office’s reduction policy states what the measurements have to show, when they are read, and how far a reduction goes when one is indicated.

What overpricing costs the office

A new listing receives most of its attention in its first days. The buyers already searching the segment generally see it in their alerts when it goes live, and showings from that group ordinarily come in the first weekend or two. That group is ordinarily the largest set of buyers the listing will meet at one time, and a price above the range tends to move the listing past their search ceilings. After that, the listing reaches buyers one at a time, as new buyers enter the segment, with the days on market shown beside the price.

Days on market is shown beside the price, where buyers can see it. In many markets a listing that has exceeded the segment’s typical time to contract tends to draw lower offers than a fresh listing. A reduction, when it comes, is visible in the listing history, and a second reduction can be read as a trend.

The outcomes reach the office in three forms. The listing that sells after a long exposure and two reductions often closes below the range it could have sold within at the start, and the office’s sale-to-list ratio and average days on market, figures that sellers and recruits examine, carry the result. The listing that does not sell expires, and its history shows that it did not sell at its prices during its listing term. And a listing that attracts a contract above the range has no closed sales supporting its price; the price may not be supported when the property is appraised, and the transaction may then be renegotiated or terminated with the office’s time already spent.

The office policy: what the data has to show

The policy set out here is the practice this course teaches; no law or lender sets it, and each office adopts its own. Under it, a reduction is indicated by measurements, not by a feeling that the listing is quiet. The office reads four of them against the segment’s own figures, which the agent records on the CMA’s support page before the listing goes live.

Showings against the segment. The segment’s new listings receive a typical number of showings in their first two weeks. A listing receiving well below that number, a third of it or fewer, for example, is likely being viewed online without leading to a visit, and that pattern points to price.

Online activity against the segment. Views and saves relative to the segment’s recent new listings show whether buyers are noticing the listing at all. High views with few showings point to price; low views point to exposure or presentation, which the office addresses first.

Days on market against the segment’s median time to contract. A listing approaching or passing that median without a contract has generally had exposure to the buyers active in the segment.

Feedback from showing agents, read as a pattern. One agent citing price is an opinion; three of three citing price, with no other issue raised, is data.

A reduction is indicated when showings, and the online saves beside them, fall well below the segment’s figures and the feedback confirms price; at the second checkpoint, days on market at or past the segment’s median adds to that reading. The competition is also re-read at each checkpoint, because a new active below the subject or a pending listed at a lower price changes the position even when the subject’s own activity has been ordinary.

When: the checkpoints

The office sets two checkpoints at listing, and the seller is told the dates before the listing goes live. The first falls at roughly half the segment’s median time to contract, when the initial group of buyers has responded; the second falls at the median itself. For a segment with a twenty-one-day median, the checkpoints are about day ten and day twenty-one. At each, the four measurements are read and the decision is recorded: continue, correct exposure or presentation, or reduce. A fixed date removes the question of whether it is “too soon,” because the date was set when the listing was priced.

How much: to a position, not by a percentage

A reduction goes to a position within the supported range, chosen the way the original position was: below the most similar actives, in line with the pendings, under a search band edge. It is ordinarily one move. A reduction that leaves the price above the range often leads to a second reduction, and the second is the one buyers can read as a trend. A reduction expressed as a percentage of the current price, or as a figure the seller finds tolerable, is a negotiation with the seller rather than a repositioning against the market.

Application

A seller listed a 2,000-square-foot colonial at $479,900 against a supported range of $452,000 to $462,000, with the agent’s recommendation of $457,900 on file. The segment’s median time to contract is twenty-one days, and its new listings averaged nine showings in their first fourteen days. Checkpoints were set at day ten and day twenty-one.

At day ten the listing has had two showings. Online views are in line with the segment’s new listings; saves are well below. Both showing agents cited price. The active at 15 Ledgewood Drive, the same size and condition, has been listed at $464,900 for forty-eight days without a contract. Showings and saves are well below the segment’s figures and the feedback confirms price, so the decision at day ten is to reduce.

A reduction to $469,900 is considered, “so the seller does not feel it all at once.” That figure is above the range and above the $464,900 active, and a listing at $469,900 is likely to show the same pattern at day twenty-one, with a reduction already in its history. The reduction is to $459,900: inside the range, below the active that has not attracted a contract in 48 days, under the $460,000 search band, and one move. The seller is shown the segment’s showing figure beside the listing’s, the two agents’ feedback, and the forty-eight-day active, and the reduction is presented as the position the data supports rather than as a concession. The alternative path, $469,900 at day ten and $459,900 at day twenty-one, arrives at the same price with eleven more days on market and two reductions in the history.

Summary

A listing priced above its range generally meets the segment’s largest group of buyers in its first days and tends to pass many of them by, and thereafter reaches buyers one at a time with its days on market beside it; the outcomes reach the office as a lower closing, an expired listing, or a contract that may not close. The office’s policy reads showings, online activity, days on market and feedback against the segment’s own figures at two checkpoints set before the listing goes live, and reduces when the measurements agree. A reduction ordinarily goes in one move to a position inside the supported range, chosen against the actives and pendings the way the original position was.