Tips to help persuade your sellers that a price reduction is appropriate.
More Sellers Dropping Their Listing Prices
As of May 1, 15% of all home sellers reduced their listing prices to accommodate the shifting housing market, according to Redfin. This 15% of sellers reducing their list prices is a six-month high and an increase of +5.9% y/y.
Why are home sellers reducing their home prices? The typical monthly mortgage payment skyrocketed a record +42% within the last three months and that monthly mortgage payment will only increase as the Federal Reserve continues to raise interest rates.
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Even with price reductions, home sellers need to know (from their agents) that buyers far outnumber available for-sale homes and that the typical home continues to fly off the shelf for more than its asking price.
Have These Two Data Points at Your Fingertips, Agents
The two most compelling data points to have handy for your home selling clients are:
- Number of months of inventory
- Days on the market
When seller’s markets pivot from having six months of inventory to seven months, sellers’ markets shift to buyers’ markets.
Agents, best to discuss a shifting absorption rate (how long it would take to sell all the listing inventory in your client’s current market) with your sellers when there is five months of inventory.
Agents, best to discuss a shifting market and price reductions with your sellers when the average Days on the Market (DOM) data point increases between 35% – 45%.
Use MLS Data to Help Persuade Sellers to Consider Reducing Their Prices
Look at these two data points on your MLS to spot a market downturn early in the game:
- Expired listings and price reductions – when these numbers begin increasing, the market is beginning to shift.
- CMA data – search comparable sales in the past 6 months and divide the comps into two groups…those that sold within 90 days and those that sold in 91 – 180 days…calculate the average price/foot for both 90-day periods…if the average price/foot for the most recent 90 days is lower than the price/foot in the longer 90-day period, property values in your client’s specific market have already peaked.
Use Portals & iBuyer Offers to Persuade Sellers to Drop Their Prices
When home sellers say, “But Zillow says my home is worth ‘more,'” use home valuations based on AVMs from Chase Home Evaluator, HomeSnap, Realtor.com, Redfin, Trulia, Collateral Analytics and Quantarium. (The last two companies mentioned are heavily relied upon by appraisers, lenders, estate professionals and Wall Street investors for property pricing.)
Realtor.com is now posting preliminary offers from Opendoor on many listings. When Opendoor and MLS price/foot evaluations align, chances are pricing estimates are accurate.
True, price reduction conversations with sellers are not at the top of any agent’s list BUT initiating these conversations with your clients while having the appropriate substantive data is truly in the best interest of your clients.
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