When we have a first conversation about listing your home or parcel of land for sale, I will be asking you questions about why you want to sell, and in what time frame. You will undoubtedly be asking me what competing properties are listed, and what comparable properties have been selling for.
These questions and answers all form part of the equation in picking a listing price for your property. Especially in a buyer’s market, which is what we have today not only in Hawaii, but in most real estate markets, this may be the most important conversation you will have with a listing broker.
If you purchased your property during the boom phase of the market cycle, or even if you just refinanced it a few years ago, or have a neighbor who sold at the peak, you most likely have a number stuck in your mind for what your property is worth.
Rationally, you know we are in a severe economic downturn, that people in your community have lost their homes to foreclosure, and that housing values have fallen dramatically. Emotionally, your home is worth whatever that last appraisal showed.
People selling their primary residence in Hawai’i are often planning to move back to the Mainland, or are staying here, but retiring and downsizing, and they will tell me that based upon their plans the need to clear a certain amount from the sale of their home. So, therefore, they need to sell their property for a particular price and won’t accept a dime less.
Did you hear me take a deep breath?
Because if either of these scenarios applies to you, what I am about to write will probably not change your mind. And unfortunately, your wishful thinking, or your listing agent’s optimism will not change the market’s mind either.
In having the pricing conversation with sellers today, I like to quote two agents, neither of whom is with Hawaii Life, who have been successful in this business for a long time. I had a listing where the sellers had picked a starting price at the very top-end of the comparable I’d provided. It was the kind of unique property that attracted a fair number of showings, but after months on the market we’d had no offers.
The sellers ran into a friend who is also a long-time Big Island real estate broker and asked his opinion. He said, “If your home isn’t selling, it is because of one of two factors: exposure, or price. Hawaii Life is giving you the exposure, so it has to be the price.” Sometimes you need to hear it from someone else. We reduced the price.
When a seller comes to me and asks, “My situation has changed and now I want to know, what price reduction would it take to get an offer in the next 72 hours?” I know there is a price level that will generate that level of buyer interest. That’s what a bank will do on an REO (property they own post-foreclosure) when it hasn’t sold as quickly as they like, and the result is a bidding war! At the other end of the spectrum, I have sellers who say, “I’m prepared to wait a year or two for my property to sell if I can get a higher price.” We see that often with the very high-end, $10+ million properties, for example.
For many sellers, their biggest fear in pricing to sell is that they will price too low and leave money on the table. Another local broker has decided that rather than have this same conversation multiple times through the course of the listing, she has the conversation about price reductions once, at the time of listing. The seller can choose an optimistic price for their property when it goes on the market, but if it hasn’t sold in 45 days, 90 days, 120 days, the price reduction has been already agreed.
I’ve recently adopted this practice and two of my listings have had their automatic reductions. When the sellers hesitated at the appointed date, my question to them was, “Did you hire me to list your property, or to sell your property? The market has not improved in the past 45 days, so if you want to sell within the time frame you asked me to sell your property, we need to signal the market now that you are serious about selling.”
Pricing your property properly is not something your broker recommends to make his or her job easier! It is a business-like approach to the job for which he or she has been hired.