Craig W. Barrett, Hughesville, REALTOR (r)
Hughesville, MD Real Estate
www.hughesvillehomes.com
Josette Skilling's blog on "No, Putting the Text of the Bonus in Bold Doesn't Work" got me thinking about price reductions. I've actually been thinking about price reductions for awhile. I know, who hasn't, but her blog moved me to write. I also saw a term today I had not seen before, reduction-aversion, on Mish's blog. As I read the blog it struck me. The blog is about new home inventory and how various Home Builders are handling price reductions, but the principle is the same. Supply and Demand.
When warranted and generally speaking, the purpose of a price reduction is to generate additional buyer interest and the call-to-action of seeing your listing and ultimately writing a contract. But what if the price reduction doesn't generate the desired result? Do you advise your sellers to cut again and again, and again? You get the point... you're chasing a downward market.
When the price reductions don't work, the obvious question is "Why didn't it work?" Was the price reduction not dramatic enough to impress the potential buyer to make the desired call-to-action? Or were the price reductions never going to work because the buyer was waiting for more? In this scenario, the sellers fear is "leaving money on the table" and the buyers fear is "paying too much". I think both are very reasonable fears, but I believe generous and dramatic price reductions are more effective.
What if the seller decided they were satisfied with the original list price and dismissed your advice of a generous price reduction? Would the sellers reduction-aversion eventually have the desired effect of the call-to-action? I don't think it would. Do you?
Discussion is here.