In 1908 the National Association of Realtors was founded. Shortly there after the Association adopted its code of ethics. My guess is some time shortly after that the practice of the “Price Reduction” became part of the standard operating procedure of most Realtors.
Price reductions are often the golden arrow in an agents quiver. However many times this golden arrow just isn’t the answer. Take the high end real estate market, the really high end of any market around the country, and you will find price reductions are a pretty common occurrence. The typical scenario goes something like this: Wealthy homeowner decides to sell a home for any number of reasons. Said homeowners calls a number of agents in the local market who have high end listings. Interviews are held, agents go over all the bells and whistles that they will bring to the table, and the question is posed – What do you want for your house? Home owner throws out a price and then the fun starts. A small percentage of agents will challenge the price based upon market facts, however the rest will, at best give a little resistance and take the listing, and at worst will agree that the owners property is worth much more than the market suggests and take the listing at the sellers price.
Now the fun begins.
With the all the fervor of a 16 year old boy on prom night the agent begins marketing the property. Broker’s Open Houses with Cocktails, Color Advertisements in the Local Newspaper, maybe some national exposure in the WSJ or The Robb Report and the holy grail of real estate marketing some coverage on the local TV Station. Quickly some interest is shown in the property and things look very bright. After a couple of the interested parties fall out, and a slow down in activity, reality starts to set in, this ain’t going to be easy. This property is over priced. Not wanting to seem panicked the agent continues to do some local advertising and is holding invitation only open houses with other agents in the market. Another 30 days goes by and nothing. After a conversation with the managing broker, the topic of a price reduction comes up. At first the topic is kind of mentioned to the seller, nothing direct, but hints as to the price that other high end homes sold, mentioning that the high end is a little slow, but nothing very direct. Finally another 60 to 90 days goes by and it’s time to ask for the price reduction.
After a very stressful conversation, the seller agrees to do the price reduction. And the cycle begins.
With renewed energy, another round of marketing begins. This time the results aren’t obvious. No new buyers are surfacing, property showing are a trickle at best, and panic begins to sink in. Two more months and nothing new. The sellers calls are a little more terse, the angst is evident in every conversation. The agent explains that they are doing everything they can do, and begins hinting that maybe its the price. The reality is that nothing in this price range is trading. The listing is getting close to expiring and there has been a lot of marketing dollars spent on the property. At this point saving the listing in the hopes of earning a commission is the main focus. It’s time to have another tough conversation with the sellers. This time the call is made with the broker on the line and the reduction is going to be big.
With the price reduction in tow, the marketing continues. This time it is announced to the brokerage community and the public that the sellers are very motivated. Words like MOTIVATED SELLER, BRING ALL OFFERS, and $10,000 BONUS TO SELLING AGENT appear in the MLS, and by the way often times on Zillow and Trulia depending how the feeds are gathered. By this time the property has been on the market for 12 to 24 months, had a few price reductions and the market has responded with a resounding “SO WHAT”.
Now it’s time to make some tough decisions, both from the agent perspective and from a sellers perspective. Agents begin thinking is the listing worth keeping and sellers certainly start thinking did I pick the right agent.
The facts are pretty straight forward. If you have a listing at the very high end of the market and it doesn’t sell in the first 60 -120 days you are in for the long haul. As I like to say make sure you “pack a lunch” because you are going to need it.
Most high net worth individuals are successful because they are in control. They control what goes on in their business, they control the investments they make, and they can exercise control of the risks they take. However traditional real estate marketing doesn’t put the seller in control. In fact in many cases it removes all control from the seller. The seller has no control of when potential buyers will see the home. The seller has no control over who the home is being marketed to, and most importantly the seller has no control of how long the process will take.
There has to be smarter way to market the upper end of the real estate market. Auctions have been a proven method to sell some of the worlds most precious goods.
The art world has long known that auctions bring buyers, and aggregate a market for the asset. Sotheby’s and Christie’s have a long history of setting record prices for art through the auction process.
Car collectors have also entered the game. Some of worlds most prized automobiles are selling via the auction process. This fact has created a number of semi-reality TV shows around the process.
Unfortunately for one reason or another real estate auctions in the minds of some agents are relegated to the foreclosure sales held on the court house steps. Slowly this perception is changing. Over the last few years luxury real estate auctions are becoming more common place and like art, automobiles and jewelry are yielding results that are setting records in markets across the county. Imagine avoiding the above mentioned scenario, and instead picking a date certain for the sale of an asset. Creating an environment that brings qualified bidders to the table, and having multiple offers on your property or your listing on a given day. Think this isn’t possible? Check this out.
Want to learn more about how a luxury property auction maybe the solution to selling your property or listing quickly…simply fill out the form and learn more.