Baby Step Price Reductions Can Backfire

Our MLS (Multiple Listing System) has a number of tools to help members stay on top of what's happening in the market. One of the most useful is the "Hotsheet" that has 3 categories — new listings, price changes and recent solds. Every day I scroll through all 3, and under "Price Changes" I look for big drops that indicate seller motivation.

Yesterday, a property in Glen Spey showed up on the Hotsheet with a price reduction — to $245,000 (down from an original asking price of $249,000 when the property was listed in April.) I thought I'd seen it show up before on the Hotsheet, so curious, I pulled up the price history. Listed in April for $249,000. Since then, there have been 3 price reductions — to $247,000 in June, $246,000 in July and now to $245,000 in September. Whoopidodah. Rather than indicate that the seller is motivated and ready to deal, these baby step price reductions indicate just the opposite. That the seller is pretty unmotivated, and that the price reductions are little more than the listing agent only getting the seller to agree to token reductions to get the listing to pop up on the hotsheet to try to grab some attention.

For me, these baby step price reductions just telegraph that a seller is unmotivated and difficult, and it likely isn't possible to strike a good deal. Unless a listing agent can encourage a seller to make a meaningful price reduction, it's probably better to just leave the price where it was. Price reductions are a powerful tool that communicate seller motivation, and token reductions of a few thousand dollars just doesn't cut it.

Comments

[compo]

I have been watching the market for some time and I run saved searches to focus on new listings. I do not want to look at those that were ruled out a long time ago. I noticed a lot continue to appear near the top of my search (sorts by new listing) because of the token price reductions. I assume they do this to catch the eye of potential buyers who know the market but are just looking for new listings.

[Adam]

Does anyone know what's going on with the dam at St Joseph's lake in Forestburg?

[jaymack]

I don't see the Hotsheet.

[Hobart Gapp]

How about thte homeowner up on the Lake in Parksville that actually keeps RAISING his price. What is the opposite of motivated? Antagonistic?

[Bix]

The word for the homeowner in Parksville is "stupid." Back in 1990, when the housing market was in a severe decline, I was looking at houses on Long Island. I remember looking at this FSBO on Suffolk where the owner was asking for a reasonable price, but insisted that the asking price was nonnegotiable. He wanted his price, not a nickel less.

So I walked away. I later checked prices in the area and he sold it for considerably less than the asking price. This was the case too with a seller who told me he was "insulted" by my offer. He later sold it for less than the "insult" price.

[Nest Dweller]

Bix is right... a house on the market in tandem with a swelled-head owner is a lethal combo. I purchased our primary residence in 2006 just after the downward slide in prices had started here (I know others will argue it came later, but in our area there was a burst of price adjustments in May 2006... more a wave of sensibility than the economy taking its toll.) After a couple of volleys, we offered $472,500 on a house that was definitely over-priced at $485,000. The owners agreed to the offer. We told all our friends and relatives that we bought a new home and were thrilled to pieces.

The following morning my realtor calls. Overnight, the owners had a change of heart and decided that our offer was too low, and went back to their $485,000 asking price (this after counter offers of $480,000 and $475,000). I was furious and told them to go pound sand.

Six weeks later, my realtor calls. The owners had reconsidered, and wanted to offer the house to us at $475,000. Not even the $472,500 that we had at one point mutually agreed upon. I told my realtor to tell them that it was one thing to insult me once, but to come back and do it again was appalling. Further, I wasn't interested in their house any longer and never would be again, even if they were prepared to offer it to me for $14.95 plus shipping and handling. I suggested that he use as many expletives as he wanted in rejecting their offer.

The end result? Everything happens for a reason: We bought a bigger, nicer place that is far more suited to our needs about eight blocks away for $423,500. The owners of the first house? They sold six months later for $455,000. Idiots.

"Bird in the hand", people...

[Quintessence]

Hi David:

I have been following this blog for over a year now and I thank you for giving us this source of viable information. I purchased a home back in February on the Pennsylvania side just about 10 minutes from Callicoon...I had heard some rumblings about gas drilling but when I asked my agent she made it seem as if it wasn't going to be an issue for our area....In June, after doing a ton of research I realized just how potentially horrible this could be for the entire region. What is positioned as green energy is anything but green and I have become a big activist on informing people especially in NYC as to what is about to take place. My question is how will this effect real estate and shouldn't an agent be disclosing this information as it could potentially harm the value of the home their client is purchasing.

Thanks,
T

[David Knudsen]

T., an agent is legally obligated to disclose any fact of which they are aware which materially affects the value of a property. At this point, any material impacts from gas drilling are hypothetical. Some may believe it will have a negative impact, but there is no documented proof of that at this point. And how will different property be impacted? In an adjoining property has a gas lease, that may have a different impact than leasing or gas drilling in the general area, but not directly adjacent to a property.

I'm a big believer in disclosure, but as regarding gas drilling, I don't know quite what there is for an agent to disclose at this point. I don't think the economic impact on a property is anywhere near as direct as the situation with the NYRI power line project.