The best way to handle price reductions

While price reductions are common in today’s market, we all know they can be a sensitive topic with your clients. How you navigate that conversation can make or break your relationship.

If an agent lies to the seller about the price they can realistically get (...which a lot of agents do to win the listing), it’s always going to come back to bite them. However, if you set the right expectations from the beginning, then your sellers won’t be blindsided by the price reduction conversation. You’ve earned their trust, and they know you’re going to do what’s best for them.

Want to know how we start that conversation? Give our latest Rise Above the Ranks episode a listen and we’ll tell you everything! (Apple | Spotify | YouTube)

- James and David

Zillow and Wells Fargo make their predictions

The latest 2023 housing reports from Zillow and Wells Fargo have one thing in common: a damp outlook for next year’s market, especially if the Federal Reserve continues to raise interest rates. Here are their most notable predictions:

• Both firms predict that sales will continue to fall, with Wells Fargo expecting a 6.5% drop in new-home sales and a 13.1% decrease in sales of existing homes

• Zillow expects home price growth to slow to just 1.3% over the next 12 months

• Wells Fargo predicts early 2024 will be the market turning point, with prices growing by 3.1% that year

Our take

The most notable takeaway from these reports is that they still predict price growth. The areas that got really heated during the pandemic may see bigger drops, but across the board, there’s not a lot of room for prices to fall until inventory really catches up. Make sure your buyers and sellers understand that. Interest rates will continue to rise, but don’t expect a major “sale” on every property.

Prices for new builds keep on building

New builds are more expensive than ever, according to new data from the National Association of Home Builders. Expensive building materials and increasing labor costs both contributed to the rising price-per-square-foot of single family homes that began construction in 2021.

• The median price-per-square-foot of spec homes started in 2021 jumped 19% YoY, while custom homes increased 5%

• Price-per-square-foot is the highest in the Pacific and New England regions at $206 and $198, respectively

• Prices are the lowest in the East South Central region at $111 per square foot

Our take

These sky-high building costs are another reason we’ve seen such high prices for existing homes. It’s hard to build when everything from lumber and steel to labor is more expensive than ever. That pushes buyers to look for existing homes. Tell your buyers that the best deal is to find a good house in a great location and make it your own. That’s where the value is, and that’s where they’ll find the most affordability.

History repeats itself

October has historically been the best month for buyers, and it looks like this year will follow suit. While prices and interest rates remain high, growing inventory levels and longer days on market are giving buyers new options.

• Inventory jumped a whopping 31% YoY in the week ending October 8th

• Time on market has doubled to 34 days from the record-low of 17 days in May and June

• The median asking price for newly listed homes increased by 8% from last year to $378,225

Our take

This news is a great reason to follow up with any old leads or former clients you haven’t connected with recently. Did you work with any buyers who decided to pause the process? Or have a listing expire? Follow up with them and share this news! Now is the time to take advantage of this sweet spot where inventory is up and everyone’s willing to negotiate.

Schematics 

The news that just missed the cut

• The international cities with the highest housing bubble risk

• Why rentals are still a great investment

• 9 tech tools every landlord needs to know

• Redfin’s Daryl Fairweather shares why the Southwest market is slowing

• Why mortgage loan defaults stayed stable in September

• A snapshot of the not-so-united state of U.S. housing market

🎧 Rise Above the Ranks

In this week’s Rise Above the Ranks podcast, James & David share the best ways to handle price reductions with your sellers… without losing their business in the process. It’s the timely topic you need to know right now as we head into the slower winter season.

• Start with a strategic price. If you price a home well from the start, price reductions may be a non-issue. Remember: if you overprice a home, it’s going to sit on the market, rack up reductions, and end up netting a lower price than if you had priced it competitively from the start and sold in a matter of days.

• Shop it off market to test the price. Before you list on the MLS, get some eyes on the listing through off-market showings and open houses. Get some brokers through the doors, start building interest, and get feedback on the list price before you go live so you know whether adjustments are needed.

• If your seller won’t budge on price, set clear expectations. Let them know if you list at that price point they need to be prepared to make adjustments along the way. Say, “If this property hasn’t sold by X date, we’re going to meet and talk about a new price.” That way they know to expect the price adjustment conversation and they’re ready to compromise.

Want the full scoop? Check out the episode → Apple | Spotify | YouTube

Q&A

You ask, James and David answer!

We’ll be back next week with another answer to a real reader question. Submit yours here!

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

The difference between agents who have and agents who want is simple: Knowledge, hustle, and heart. You’re already off to a great start this week reading The Blueprint. Keep up the momentum by nailing your follow-ups, crushing your door-knocking list, and getting one step closer to your year-end goals. You’ve got this!

Have a fantastic week!

-James and David

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