All too often we see or have property clients with overpriced commercial real estate listings. Some of those listings may even be on our books now. The fact of the matter is that those listings are a ‘financial crisis’ in brokerage, that will potentially waste a lot of your time and professional skills. (NB – you can get plenty of listing tips in ‘Commercial Snapshot’ right here – it’s free)
It is hard to ‘move’ overpriced listings. It is also hard to encourage an offer or a negotiation on properties that are being marketed well above the ‘realities’ of the location and the property type. Buyers are selective and well aware of the current market conditions of the zone or the property type.
An overpriced listing will usually create all the following issues:
- Produce low levels of enquiry
- Generate poor inspection outcomes
- Lower the professional profile of the agent and the brokerage
- Waste brokerage resources
- Waste marketing money
- Give a competitive advantage to other listings and agents in the zone
- Frustrate the client relationship
If a listing is not well priced at the outset, any momentum that was to come from the marketing campaign is wasted. A listing that is unrealistically priced simply gets ‘stale’. It is very hard to resurrect a ‘stale’ listing, and in many cases, a property like that should be removed from the market for 3 or 4 months to ‘reset’ the marketing approach.
Property buyers know what is happening locally from a price perspective with a property type, and will not bother going further with something that is well outside the established pricing trends and expectations.
Conditioning and Positioning
Here are some ideas to help you handle clients with properties of this ‘overpriced’ type:
- Confirm the client’s understanding of current market conditions for the zone and the property type. They may have little awareness of what has happened in the region over recent time.
- Demonstrate the real prices achieved by other local properties (not the asking prices), and show those numbers on a graph. It is important to use the ‘visual’ approach when conditioning a client. Engage the client with a visual display of trends over time.
- Justify the importance of the marketing process in creating enquiry. Ask for vendor paid funds as part of accepting the listing. If the client is serious about their listing, vendor marketing funds should be available for conversion and use in the promotional campaign.
- Determine the timeline that the client must satisfy in the sale process. If the client is working on a timeline, then the first weeks of the campaign are critical to getting in more enquiry. Any momentum can be lost, then resurrecting a stale listing will be hard. Show the client how that logic works with pricing.
- Check price trends in the area for the last 12 months and show the client how that local trending will impact their property and campaign. Price evidence is hard to ‘refute’. A client’s property may be the ‘best’ in the area, but it will still fall into the ‘averages’ when it comes to price outcomes.
- Validate recent enquiries on other properties and talk about any buyer feedback with relevant inspections in the zone. ‘Third party feedback’ from other listings will be valuable in ‘value’ comparisons and communications. Condition the client with local property market assessments and evidence.
- Demand exclusivity if you are to be working on the listing. Don’t take on the listing in any other form. Exclusivity is essential in today’s property market in most towns or cities. If you are the specialist for the location and if the client knows that fact, then converting the listing exclusively will not be a problem.
Given these things, you can analyse the strengths and weaknesses of the asset to be listed, and then be fully prepared to explain market conditions to the client. Don’t let the client and or their property waste your precious time and efforts.
Should you walk away from a listing if the client will not adjust price expectations to the location and the property market? Yes, of course.