Price Power

The spring market has finally arrived. The winter was long and cold; by March buyers were so tired of being wet and snowy that they ceased attending most open houses or bidding on most properties. Now, after a slow first quarter, the market has come to life. And not just the market for properties under $2 million, which has enjoyed strong activity throughout the winter. The more expensive properties have also picked up. Nothing sells, however, unless the price is right.

It has been a year of ambitious pricing. Sellers feel inspired by the stories they read in the media to reach for the stars. And we, as agents, can also be guilty of bidding asking prices up in our own optimism or desire to make sure we obtain the listing. But introducing a property to the market at the wrong price can cost the seller time and money. It can alienate the best pool of buyers, those who have been waiting and are ready to buy. Dissipate the pent-up demand and a long marketing period is often the result. Time after time, properties remain available until their prices are adjusted to levels which buyers can rationalize through analysis. We have seen this frequently in recent weeks: the property which has lingered for months on the market takes a price reduction, usually a minimum of 10% below the original price, and suddenly the offers come in, often several during the first week. These are properties which had received no offers during their time on the market at the higher price.

One of my top agents likes to go into meetings with overpriced sellers and say “The market has rejected your price. What do you want to do now?” While this may be harsh, it does ring true. Sellers will frequently fire an agent who cannot sell the property at an inflated price, believing that better or more aggressive marketing will sell the property. But in fact our market is efficient. The goal of marketing is to drive traffic to the property – so if the property is shown often or receives a substantial number of online hits, then the marketing is working. Marketing does not SELL real estate; its goal is to create exposure. AGENTS sell real estate, but they must be given the necessary tools. None of those tools matters more than a realistic price.

Sellers can (and should) clean up their properties; they can (and should) stage them. Agents should make their exclusives as easily accessible as possible; we should make sure to be available and accommodating when making appointments. We can take beautiful photographs, draw accurate floor plans, make phone calls to colleagues. But we cannot make buyers, who are increasingly well informed every year thanks to the Internet, believe in a price which cannot be justified by comparable sales and a relative sense of desirability. And for a seller, adhering to such a price, in the face of week after week with no offers, undermines the property’s credibility and, as the time on the market accumulates, can taint it because of its failure to sell.

In today’s increasingly active market, with a seemingly chronic inventory shortage in almost all areas of Manhattan and Brooklyn (except highly priced midtown condominiums) every property which makes sense sells. If it doesn’t, and the property enjoys the services of a credible agent with a robust and realistic marketing plan, then price is almost certainly the problem. It is a smart seller who acknowledges the issue sooner rather than later. Once reduced, the property should generate enough interest and excitement to attract several buyers and trade at its highest and best price.