When it comes to marketing and selling commercial real estate, you will come across many property owners that want to ask the high price for their property and then ‘reduce the price’ when they know what the market wants or when an offer comes in.
The problem is so common and you should deal with it immediately it arises. Do not waste time with overpriced listings. Condition the client correctly to the market from the very start.
A Common Pricing Problem
Some property owners believe that they can always ‘start high’ on price and come down to a lower figure when they have to. The reality of the situation is that an overpriced property will create little enquiry; it will ‘kill’ the property enquiry before any occurs.
Whilst there may be some property buyers out there with a ‘bucket load of money’ they do not normally have a ‘bucket load of stupidity’ to go with it. An offer will only be made when the buyer can see real price terms and conditions matching the condition of the property in the current property market.
The Property Market Facts
The facts are these:
- Property buyers know what the market is like and they will only pay the price that is reflected in the current market conditions.
- There are fewer buyers around currently for the available and greater numbers of properties for sale. This means that you as the real estate agent will have to do more with less. Every enquiry you get should be optimised and not rejected by the vendor because of a highly-priced listing.
- The market determines the property price and not the vendor. There are plenty of vendors that do not sell their property because of their failure to align their property to the current market conditions.
- Today many property buyers take longer to make a decision on purchasing a property. If you lose the buyer’s interest in the property, you may lose the only offer that could come your way.
I call this property owner ‘naive’ and a ‘waste of time’ to themselves and to the agents that may choose to list the property.
After say some 6 months of exclusively listing their property with one agent at the higher price, the property owner usually steps out of the listing appointment with no sale and quite unhappy and disillusioned with the momentum.
I note that some agents may still take on the listing today thinking that they can condition the client to the correct market conditions. If you are going to do that, then use the ‘auction’ method of sale because it will allow the property market to condition the client. They are more likely to believe the market than believe you as their agent.
Dumb isn’t it? However, it is a fact. If the client is so convinced that their price is valid and correct for the property as it is today, then they should be comfortable in taking their property to the market by auction. You can do auctions today in rooms, at the property, or online (subject to your state property laws and any overriding local conditions).
The only time the property owner can play this ‘silly’ price game is when the market is rising strongly and when available stock is low. Make no mistake here; that is not the current market conditions in most locations today.
Client Conditioning Strategies
So what should you do about these time-wasting property owners? Here are my thoughts:
- Tell them the way the market is currently as to supply and demand. Give them evidence and show photos.
- Give them a summation of price trends over the last 5 years, and tell them about property enquiry and ‘time on market’ today. Show them some graphs.
- Show them the competing properties that remain unsold on the market at the moment. Show them pictures and drive them to the locations.
- Give them a precise summation of market enquiry today based on the target market. Tell them what you have in your database and what you can work with.
- Recommend the right price based on current market conditions and the type of property.
- Recommend the right method of sale based on the property type and the location.
Top agents do not usually take on time-wasting clients and listings. You have a choice here so make the right choice. Be known as the agent that does all the deals locally and not the agent that lists and gets very little result.