Home sellers – do not drop your price!

by Neil Jenman

READING TIME: 10 minutes apx

When home sellers get anxious about selling, the first thing they usually do – or, more correctly, the first thing agents suggest they do – is “drop the price”. If only they knew how desperate this can make them look.

In his book, Down and Out in Paris and London, George Orwell, wrote: “It is fatal to look hungry. It makes people want to kick you.”

If you’re selling your home, it can pay you well to heed Orwell.

Why? What do the words of an English writer who died almost 70 years ago have to do with selling your home in 2019?

Well, here’s the connection. One of the biggest mistakes made by home sellers is appearing far too hungry – or eager – to make a sale.

Without meaning to denigrate them, buyers can be like sharks. They can ‘smell blood’. If they think you are desperate to sell, they will move in for the financial kill. The more desperate the sellers appear to be, the lower the offers will be.

MOTIVATION.

Yes, Orwell was right, if you let people know that you are hungry or desperate to sell your home, you will get kicked.

You see it all the time – advertisements with screaming headlines that say such things as “Desperate Owners” and “All Offers Considered” or, worse, headlines that reveal the sellers’ motive such as “Owner in Financial Difficulty” or “Divorce, Must Sell” or “Due to Ill-Health”. These headlines all cause buyers to offer lower prices for homes.

When you are selling your home, please get one point straight: Your REASON for selling (your “motivation” as agents call it) is no one’s business but yours. Never say (or allow agents to say) such price-dropping words as “desperate” or any sentences that reveal your private reasons for selling. Unless, of course, it’s something relevant (such as an axe-murderer living next door), your reason for selling is no one else’s business.

BE RELUCTANT NOT DESPERATE.

Instead of using the word “desperate” which causes buyers to offer you a lower price, use the word “reluctant”. You love your home and you are reluctantly selling. Being reluctant is far different from being desperate. And even if you are desperate, don’t tell anyone.

The minute buyers get a sniff that you are “hungry” to sell, you’ll get financially kicked. Don’t believe it? Agents have been using the “desperate seller” come-on for years. Consider this statement that was once made by a Queensland TAFE teacher about selling homes by auction: “Sometimes it’s good to give the owners a kick in the guts.”

LOVE IS IMPORTANT.

Sure, price is important in real estate, but it’s not nearly as important as many agents have you believe. This is especially true if you are fortunate to own a beautiful home in a popular location.

Here’s a little quoted but big real estate fact: Sellers sell with their wallets, but buyers buy with their hearts. When selling, money is the most important factor. When buying, appeal and emotion is usually the most important factor.

It doesn’t matter how low the price, if the buyers don’t like (no, make that “LOVE”) the home, they are never going to buy it. This applies to family home buyers more than investors. Buyers who plan to live in your home are concerned about their happiness.

Never underestimate the power of love, especially when it comes to buying a home. Buyers will often pay the full asking price – even more – for a home they love. Oh sure, most buyers try and get the price down, but, believe it, if they really love it, most will increase their offers. Indeed, if more than one buyer falls in love with your home, that’s how you can sell for far more than your initial asking price, especially if your agent is a skilled negotiator.

FOCUS ON BUYERS, NOT SELLERS.

When agents contact me and ask for help “putting a sale together”, I tell them that, in most cases, they are focusing on the wrong people. Instead of trying to get the sellers down in price as most agents do, they should be getting the buyers up in price.

Agents, the solution to making more sales is to focus on buyers not sellers. Instead of doing what you so often do – heading straight for the sellers because you know them better than the buyers, take the time to qualify the buyers and find out some information that most agents never discover – such as how much they can pay. Learn how to “sell” real estate for goodness’ sake, instead of just being a messenger delivering offers.

FOCUS ON POSITIVES.

As soon as they sign-up sellers, most agents start talking about all that’s wrong with the home. This is a costly mistake which hurts the sellers. Instead of focussing on what’s wrong with a home, agents should focus on what’s right with it. As we say in Rule 8 of the Jenman ‘42 Rules of Modern Real Estate Negotiation’, if you focus on the positive features of a home your chances of getting a better price increase enormously. Almost every negative can be overcome or, better still, turned into a positive.

ASK THE RIGHT QUESTIONS.

Learn how to ask questions that appeal to buyers’ emotions such as what’s more important in their lives: their happiness (finding the right home) or their money (grabbing a bargain). If buyers love a home and can afford it, agents should do all they can to persuade the buyers to buy the home.

Don’t let agents scare buyers by yelling at them with a hammer in their hand in front of crowds of other people, many of whom are just sticky beaks. As one agent (who was once a great negotiator) once said, “You can’t negotiate with strangers.” And this is one of the main problems with agents today, they don’t know the buyers. How do you negotiate with someone you don’t know?

So, when you are a seller and agents ask you to drop the price, tell them to get the buyers to increase their price. If they use the cliché about “the market says your home is not worth as much as you are asking”, try replying, “Well maybe you are not worth as much as you are asking in commission.”

Seriously, anyone can sell any home if it’s cheap enough. It takes no intelligence to lower the price, but it takes great skill to study negotiation and realise the price is just one of many factors in a sale.

PRICE POINTS.

There are ‘price points’ in property selling. Buyers generally look within their price points. If your home is for sale for $895,000 and you drop it to $875,000, nothing much will happen because buyers will be looking in the 850 to 900 range. Indeed, when buyers see you drop the price by a few thousand dollars it says you are getting anxious. So, you may as well increase the price to the TOP of the current price point. For example, if you are asking $775,000, you will often get the same response if you ask $799,000.

The only real way to maybe get some real action is to drop your price to the top of the next lower price point – in this case, that would be $749,000. But do you really want to slash fifty thousand dollars off your price?

BE CONFIDENT ABOUT YOUR PRICE!

Be confident about the asking price of your home, especially if it is not a ‘cookie-cutter” property (one that’s near identical to many others). Learn how to justify your asking price. You should never say that you “need” the figure you are asking because, really, neither the market nor the buyers care what you “need”.

When agents latch on to a negative feature of your home, they will keep on harping about it until you crack. NO! Prepare your answers well in advance – and one of the best answers to any “negative objection” is to give the best positive response you can think of – the price again. For example, if your home is on a busy road, you say, “Yes, we allowed for that factor when we set our asking price.” OR you can think of a positive response such as, “Well, it’s only busy during peak hour.” OR, you can say, “From inside, you barely hear the noise and you certainly don’t notice it much.”

Selling a home for the best price often comes down to a battle between the negatives thrown at you by the buyers and the positives you can throw back. Whoever has the most points wins – the buyers wear you down with all their negatives or you persuade them with your passionate positives.

Don’t get nervous. If you believe your home is worth the price you are asking, be confident about your belief and don’t be quick to drop your price.

WHY DO YOU LOVE YOUR HOME?

Here’s what all sellers must do, especially if you own a lovely home that’s got plenty of uniqueness about it. Make a list of all the positives of your home. Give that list a title such as ‘17 REASONS WE LOVE OUR HOME’. The more reasons the better. Print the list and make sure you tell your agent to hand it to every buyer who shows any interest in your home. You will be surprised how just one small point could be the BIG selling point that wins the best buyers.

When you’re selling, the best buyers are the ones willing and able to pay you the best price. To the buyers, the best sellers are the ones who have the best home – not necessarily at the lowest price.

It cannot be repeated often enough: buyers buy with their hearts (at least the best ones do) and if they fall in love with a home they will often pay “above market price”.

BEWARE OF COMPARISONS.

Consider something else, especially if your agent starts to compare your home with similar homes sold in your area. Most homes are under-sold, meaning that the buyers would have paid a lot more.

Early research by Melbourne agent Jim Grigoriou (a close friend of this writer) who is working on a book called ‘THE REAL ESTATE SHORT SELL – Australia’s Hidden Real Estate Scandal’ is revealing a shocking discovery – more than 80 per cent of homes are short-sold. Most buyers (apx 87% in early figures) openly admit they would have paid more for the homes they bought.

How much more?

Well, it appears to be around ten per cent of the price. This means that the homes an agent has so carefully gathered for you (as “evidence” that you need to drop your price) are homes where the average buyers would have paid ten per cent more.

If you are being shown homes that sold for a million dollars, you can safely add on another hundred thousand dollars to discover the truth. Do some quick research yourself and you’ll see that most buyers pay far less than they are prepared to pay.

AGENT INCOMPETENCE.

Here’s the biggest reason buyers do not pay their highest price – agent incompetence. This is especially true with auction sales where almost all homes are ‘short sold’.

Research reveals that when buyers are asked why they didn’t pay the amount they were prepared to pay, a common answer is: “We didn’t have to.” The incompetence of typical agents is simply mind-blowingly-staggering.

For instance, one of the statements that agents are trained (yes, taught by their franchise groups) to say to buyers when they express interest in a home is this stupendously stupid question: “Would you like to make an offer?” Make an offer! In other words, pay less than the sellers want! That’s not selling, that’s giving the sellers’ money away due to stupidity. Instead of asking buyers if they’d like to make an offer, how about asking when they’d like to move in?

INCREASE YOUR PRICE!

This might seem strange – and most agents will hate this – but sometimes you’ll increase your chance of selling your property if you increase the price not decrease it!

Why?

Well, quite simply, if you increase the price – especially substantially, you move into another price point – and a whole new ‘pool’ of buyers will see it.

Now, to be sure, agents are always telling sellers to lower their asking prices – often quite substantially. They justify this by saying that, when you go from, say, $849,000 to $799,000, you will attract a whole new pool of buyers. True. But what’s also true is that the same works in the other direction.

Instead of going down to the price point below, go up to the price point above you. What’s the worst that can happen? Well, probably the same that’s happening now – nothing. But I have seen it happen many times in my real estate life – changing the price is what’s often important. And you can change it in either direction – down or up.

For example, I am helping a lady to sell her lovely cottage in a small country town. It has been for sale for 18 months with an asking price of $275,000, with almost zero interest. The agent has been urging her to drop the price. She is considering making it $265,000. But that’s in the same price range as $275,000 so there will be really no difference other than people seeing her lowering the price which may make her look desperate (“hungry”). I told her that she may as well increase the price to $295,000.

After almost an hour of speaking with her, I had a serious thought – the price has nothing to do with her not selling the home. She just hasn’t promoted it in the right places which means she hasn’t found the right buyer. It was obvious that, at $275,000, this home, which is more than a hundred years old and on a huge piece of land sounds like the bargain of this century. I then told her the price sounded way too low. Maybe prospective buyers are thinking it’s too cheap which means they are wondering what’s wrong with it.

Other than the seller getting all stressed and starting to lose confidence in her price, I couldn’t find anything wrong with the home. The more we spoke the more I was convinced – her asking price is not too high, it’s too low.

After I explained my reasons, I seriously suggested that she consider increasing the price from $275,000 to $495,000. Yes, that’s right, almost double. Okay, it may not work. But what if it does?

Agents almost never tell sellers to increase their prices if their homes are not selling. Be assured, however, that increasing your price can work – not often, but sometimes.

No matter what price you are asking, you can be sure of one thing, most buyers will want to make you an offer.

HANDLING OFFERS

Be prepared for clever questions buyers use to persuade sellers to lower their price. Questions such as: “Why are they asking the price?” Instead of getting all defensive and saying something such as, “Well, they may consider an offer,” a good agent will say, “They are asking this price because the home is so beautiful and in such a great location.” Or, the common question that almost all buyers ask: “What will they take?” Instead of immediately suggesting a lower figure, the skilled agent will say something such as: “Well, unless someone else comes along and offers them more – which often happens on beautiful homes such as this one – I assume you’ll have a good chance of the owners agreeing to take the asking price, which is very reasonable.”

As sellers, you must not let offers intimidate you or annoy you. Again, stay confident and be proud of your price. If you do have a beautiful home, you should be able to rightly reply to any offers by saying: “Someone will come along and appreciate the beauty, the quality and the location of our home, so we are confident with the price.”

Please be careful of buyers who make ‘test’ offers. Never discuss your price unless you are dealing with serious buyers. The best way to know if buyers are serious is by how much money they are prepared to ‘put up’ with their offer. Remember the famous movie line, “Show me the money!” – the same applies in real estate. If buyers aren’t prepared to show you their money, they aren’t very serious. You’ll put yourself in a precarious position if you accept an offer and then the buyers say they will think it over. The next thing you know, everyone in the district knows how low you’ll go. Serious buyers show you their money.

VALUER

Admit something. You are biased. It’s your home and you love it. Naturally, you think it’s better than other homes in the area. Just as we think our children or relatives (some!) are better than others, it’s natural to attach the word “best” to everything in your life.

Psychologically, believing that your home is better – and therefore worth more – is known as the “endowment effect”. Therefore, homeowners often tend to choose the agent who tells them what they want to hear: “Your home is the best we’ve seen, of course, we can get you a million dollars more than similar homes.” This means, of course, that you hire the agent who told you the biggest lie.

There is nothing wrong with being proud of your home, there is nothing wrong with wanting the highest price for it; but, if it doesn’t sell – and you have tried everything else – then, maybe, just maybe, your asking price may be too high.

But, again, before you even consider drastically reducing your asking price, why not hire one of the most honest people in real estate – a registered valuer?

Unlike agents, real estate valuers, have no vested interest in the price they give you. Unlike becoming an agent – the qualifications for which are basically a pulse – becoming a valuer can involve a five-year university degree.

Valuers research your area; they consider every aspect of your home and they carefully and very diligently come up with a price they believe is correct. You do not have to show the valuation to anyone – unless it will assist you to get the price you want – but at least, with a valuer, you know you are getting the truth. Yes, sure, valuers get things wrong sometimes. But not as often as agents who get things wrong almost all the time.

Unlike agents, valuers do not care what you think about the price they give you. You pay them regardless of the price – and it’s not much, perhaps a few hundred dollars. A valuation is often the best investment you can make when selling your home. And, if the valuation is equal to, or greater than, the price you want for your home, you have another reason to feel confident and proud about your asking price.

Price is important, for sure, but it’s not as important as many agents tell you. If you have a lovely home – and it’s priced fairly – then, sooner or later, buyers may fall in love with it and gladly pay you what you think your home is worth.

If not, well maybe then you can think about lowering your asking price – preferably into the next price point.