WELCOME

Hello! Y’all, I wrote this before I left for vacation. While I don’t have a crystal ball, I believe I can accurately predict that I’m having a whale of a time, making new friends, eating the best Mediterranean food, and being absolutely knocked out by the scenery. What more could future me want?

Today we’re covering an evergreen topic because it’s always relevant. I want to address the strategy of price reduction. I think so often we’re asking ourselves the wrong question. We’re so focused on “when?” and “how much?” that we forget to ask “what do we hope to accomplish?” So I want to drill down on how we can ask the right questions and provide the results our clients count on. Since Future Glennda is likely in Italy when you read this, I’ll/she’ll say andiamo instead of let’s go!

STORYTIME WITH GLENNDA

The Eternal Question

Buckle up, we’re going on a bit of a journey today and it starts in the car.

So, a while back, I was sitting in the Porsche, thinking about a house. Now, this is not unusual because I spend an extraordinary amount of time thinking about houses when I’m supposed to be concentrating on other things. I mean, it’s just what I do. Anyway, I’d been talking to one of my clients the previous day because we were considering a price reduction. The client owned a million-dollar home. But we’d gotten to the point in the listing where we had to decide what was next:

Did we make a meaningful price reduction?
Did we make a small one?
Did we pull it off the market entirely and bring it back?
Did we leave it alone?

Somewhere in the throes of that conversation, I found myself asking a question that I couldn’t answer myself:

What is the tangible value of a notification?

Because here’s what often happens… let’s say Bobby and Susie looked at the house three weeks ago. Maybe they physically came through, kicking their shoes off at the front door and taking a long walk through the property, pausing to imagine themselves living in their favorite parts of that house. Maybe they envisioned their kids playing Marco Polo in the sparkling pool, baking a cake in that shiny steel Viking oven, or sipping coffee and watching the sun rise over the verdant green golf course. Or maybe they never visited at all. Instead, they just perched on their couch and inspected every picture like they were trying to parse still shots of the Kennedy assassination. Regardless of how that home came on their radar, they liked it enough to pit a pin in it… but not enough to write an offer.

So, what happens when that house that they liked has a price reduction? Suddenly, we’re back in their living room and in front of them, without ever having to call or text or hunt them down like a hound dog. A price reduction notification has them looking at that house again, imagining that pool again, that oven, that deck, and that has value.

I said to my seller, “If we’re going to reduce the price by $25,000 anyway, is it better to reduce it to $25,000 once, or do we reduce it $5,000 five different times?” Think about it—five reductions could mean five notifications. I know that a $5,000 break isn’t going to be what suddenly makes Bobby and Susie able to afford the house. Nobody’s sitting there saying, “Bobby, we cannot possibly swing $1,025,000, but oh, my stars, at $1,02,000 the price is suddenly right!” That’s not what we accomplish with a $5,000 drop. However, what we can accomplish is a little shoulder tap, a little, “Psst, remember me?”

I thought about our conversation for a while, which made me realize there’s a much bigger question underneath it, y’all. As agents, we spend time endlessly talking about how much to reduce price… but maybe we’re not talking nearly enough about what we need that reduction to do. Reducing the price and what the reduction is supposed to do is not the same conversation, and we can get ourselves into trouble if we think it is.

Let’s be honest, sometimes a price reduction needs to correct a price we were a little ambitious about. Like we didn’t get it right the first time around. Or it could be that the seller insisted on the number (ahem, against my better advice) and we agreed to give it a (long)shot. Could be that the market changed since we listed it, like if three competing houses came on the market after us and that impacted the value proposition. Whatever the cause, the market’s telling us this house isn’t worth what we’re asking right now. In situations like these, I feel like fooling around with tiny price drops doesn’t help anyone. What we need to do is to listen to what the market’s telling us and getting the house to a number that makes sense.

However… sometimes the price isn’t wildly off base. Sometimes the home has just gotten a tad stale, like when everyone who was going to see it when it first came on the market has seen it. The buyers have already scrolled past it, and maybe they even liked it and saved it, filing it under “possible.” Chances are, they even said, “Listen, if this ever comes down on price, give me a holler.” Now the job of a price reduction is less about making the home more affordable to an entirely different persona and more about waking everyone up who previously expressed interest.

And that is where I started wondering about those $5,000 reductions because five opportunities to remind people that this house exists sounds a whole lot better than one.
But, the more I thought about it, the more I started wondering what else those notifications are telegraphing, because buyers aren’t stupid, and neither are their agents. The first notification says, “Oh, look, they reduced the price.” The second one might say, “Huh, they’re getting serious.” By the third or fourth, I don’t know that Bobby and Susie are thinking, “We’d better hurry up and buy that house!” or if they’re thinking, “Let’s wait until Thursday where they knock off another five stacks.”

I feel like this is where we’ve got to be careful because we want price reductions to create urgency, not to teach patience.

Also, there’s an ocean of difference between changing a price and changing a price bracket. If I have a house listed at $1,025,000 and I reduce it to $1,020,000 I’ve changed the price, but I haven’t necessarily changed the audience. Now if I take that same house to $999,000, I may have done something entirely different. I may have put it in front of people who searches stop at $1,000,000. Those people weren’t rejecting my house before because some of them may never have seen it.

This is why I think we’ve got to stop treating price reductions like somebody pulled a number out of a hat. We can’t be all, “I guess $10,000 sounds respectable, so let’s do that.” Or, “I feel like $25,000 sounds painful enough that the seller will believe we’re doing something, so let’s land there.” None of that tells me what the new price is supposed to accomplish. I want to know where we’re landing, what’s waiting for us there, and whether that number changes the way a buyer sees the house.

I also want to know what’s actually happened since we listed it because the number of days on market doesn’t tell me nearly as much as the behavior does. If we’ve had 30 showings and nobody’s written an offer, the market is speaking to us. (Loudly and in all-caps.) If we’ve had three showings, that’s another conversation entirely. If we’ve had two offers and the seller turned both down, I don’t necessarily have a marketing problem. If every single person who comes through says the primary bathroom needs to be done, I need to know whether the price compensates for that. If everybody loves the house but says the road noise bothers them, well, I cannot pick up the house and move it two streets over. At some point, price has got to account for the things I can’t fix.

This is where being an experienced agent matters, because our job is not to run back to the seller every two weeks and say, “Welp, I guess we should reduce it again.” No, ma’am. Our job is to interpret the marketplace. The market gives us information every single day. Showings are information. The lack of showings is information. Saves are information, as are feedback and offers. The house that went under contract while ours sat there is really good information… even if it is painful. It’s on us to take all of that and figure out what the market’s trying to tell us before we start changing numbers willy-nilly. And then we’ve got to suck it up and tell the seller the truth, which is often the hardest part of all of this.

Nobody wants to hear that their house is worth less than they thought it was. They remember every dollar they spent on that reno, believe me. I had a client who said to me, “But, Glennda, I put $60,000 in that kitchen!” Uh-huh, and then you cooked in it for six years. It’s not on the buyer to pay you back for your memories. That wasn’t an investment so much as it was your life. Yet often buyers can’t get past the flashbacks of the beautiful Christmas mornings and the birthday parties and the afternoon they planted that Japanese maple in the backyard. A seller doesn’t experience a price reduction as a line changing in the MLS. Oh, no. That reduction feels personal and if we don’t understand that, then we are about to have a very difficult conversation.

The thing is, we can’t let our desire to avoid those difficult conversations turn into a series of meaningless price reductions. Sometimes the kindest thing we can do for a seller is to say, “Listen, we tried and the market answered us.”

Granted, I still think there’s real value in the notification. I love anything that puts my listing back in front of a buyer who’s already raised their hand and said they’re interested enough to bite. I absolutely want Bobby and Susie to get that little ding on their phone and talk about my house over dinner again. I just don’t want to confuse capturing their attention with changing their mind because those are two very different jobs.

So, now when I’m thinking about a price reduction, I want to start with a different question. I don’t want the question to be, “How much should we reduce it?” I want to ask:

What does this new price need to do?
Do I need to reach a new group of buyers?
Do I need to cross an important search threshold?
Do I need to become the obvious value compared with my competition?
Do I need to wake up the people who already like the house and are just sitting on their hands right now?
Do I need to accept that market told me we were wrong with our first guess and it’s time to swing lower?

Once I know the answer, I can figure out the number. Every price reduction ought to have a job. If I can’t tell my seller what changes when we move from this price to that price, then I don’t have a pricing strategy yet.

All I’ve done is make their house cheaper and I think we owe our sellers a whole lot more thought than that.

@glenndabaker

Big slash or baby steps? Which price drop strategy actually gets a home sold faster? #SugarAndSpiceRealEstateAdvice #G#GlenndaBakerR#RealE… See more

Today’s Words of Wisdom

GLENNDA BAKER & ASSOCIATES

The Answer Depends on the Question

When a home’s available both for sale and for rent, the question isn’t necessarily, “Which one’s the better deal?” It’s, “What makes the most sense for my life right now?” This home at 4815 Brisco Drive in Cumming, GA, gives you that choice.

If you know you want to put down roots, build equity, and make this incredible cul-de-sac home your own, buying may be the answer. But if you want the space, privacy, upgrades, and lifestyle without making a long-term commitment just yet, renting gives you that flexibility. Same beautiful house, two very different paths—and the right one is the one that fits where you are today and where you think you’re headed next!