Many commercial real estate agents today will still escalate the listing price by 5 to 10 per cent above market, and in doing so will explain to the property owner that it will give the property owner some room to negotiate when offers are made. The reality of the situation is that the overpriced listing will create little enquiry. Three or four weeks later the agent and the client will be sitting down to discuss price modification and changes to marketing. What a waste of time!
As the local commercial real estate expert do not escalate the listing price on this basis. It is a very bad mistake at a time when the market has limited enquiry and therefore fewer buyers for you to work with.
The listing price should be the right price based on market evidence and prevailing market conditions. The client needs to understand what those things are. They have come to you as the expert agent and on that basis you should give them the real facts as they exist today before the listing is taken.
Placing a price or negotiation buffer above the asking price for the property will set a false set of values in the ownership ‘mindset’ at the time of listing. At the very start of the listing made on this basis, the owner will assume that they will still get the offers and therefore the required asking price. In a slower property market, this fact is far from the truth. Things do come down in price, and the vendor needs help in understanding that.
So here are some strategies for handling unrealistic vendors with highly priced properties:
- Deal with the issue immediately when you know that this is to be the case. Tell the client exactly what the market is like and show them the competing properties that they are up against. Provide differences when it comes to improvements and market enquiry for each listing type. Show them the amount of enquiry that is coming in currently.
- Most clients or property owners will believe that their property is the best in the area and therefore of greater value than any other property. Understand that they have owned this property for a number of years and their thinking has been shaped by that direct and lengthy ownership. Unless the property is extremely unique, average prices will apply and the average offers will only come in.
- Buyers will rarely pay a premium for a property unless it is extremely unique and highly desirable. Around 90% of properties taken to the market today are only average and nothing unusual from a buyer perspective. The clients that you work with need to see this and adjust their price accordingly. That is where your skills as an expert agent are highly desirable in negotiating the listing at the right price and method of sale. Don’t forget to get some reasonable vendor paid marketing as part of the process!
- Ask the client to set some priorities when it comes to time on market, and successful sales result. If you are going to take on a highly priced listing, you will need their agreement to making a price reduction and adjustment within a few short weeks of the campaign. Tell them at the time of listing that this is what you will require to prevent the listing becoming stale on the market.
- Every inspecting prospect taken to the property should complete a ‘comments form’ that you can give to the client regards the inspection undertaken. Any property that is overpriced will soon be identified through the comments provided by these inspecting potential prospects. This will then make it a lot easier for you to condition the property owner at the time of required price reduction.
- Every bit of marketing undertaken for the property should be assessed and analyzed. Compare the marketing and response for your particular listing against the other listings in the local area and those in your agency records. You will soon be able to identify to the client the response differences between their highly priced property and those other properties that are more suitably priced.
- Show the client the differences in marketing results and inspection results. You cannot sell a property unless you have an enquiry. Highly priced properties really create enquiry. They also kill their own market within a very short period of time.
All of these facts would suggest that you should not waste your time with a property listing that is well above market. Set your rules when it comes to working with clients of this type. Be prepared to walk away from a listing that is too highly priced. It is better for you to work on committed clients and realistically priced listings.