Would a one dollar price drop motivate you to buy a home?
There is an active listing that pops up almost every day as a “Price Change” update in one of the neighborhoods I like to keep an eye on. At first I thought maybe this was a glitch, as the price seemed to be the same each time (or so I thought). This morning it was there again so I decided to investigate further.
I ran an Archive Report on the home, which shows the entire MLS history of a property, and sure enough, the agent has been lowering the price by $1 almost daily for the past couple of weeks. This, in my opinion, is an ineffective and counterproductive pricing tactic.
The home started out grossly overpriced in the mid $200’s in June 2007. It was never going to sell for that much. I remember the day it came on the market and I saw it. At 64 days on the market the price was dropped $19,900 (now that’s a price drop, but it was still over priced). At 75 days on the market, the price was dropped another $100, then another $100 the next day. Then the price was dropped ten times over the next 15 day, $1 each time, until the listing expired.
The same day it expired, the listing was entered again as a new listing by the same agent, at a list price about $700 below the expired list price. Since then, the list price has been dropped $1 per day 8 out of the last 9 days. It’s now been on the market for more than 100 days, and it’s still over priced. At this rate, in about 30,000 days (82 years) the price will be right. But of course appreciation may shorten that time frame to about 4 years.
The reason the agent is doing this $1 price dropping every day, I presume, is to force the still overpriced listing to remain at the top of buyer search portals as a “Price Changed” listing, and to force the overpriced listing to show up on other agent’s the daily Hotsheets as a “Price Changed” listing. This, theoretically I suppose, causes potential buyers and agents to regularly see the listing and eventually become interested. That’s the only rationale I can think of.
Well it worked, sort of. I was so baffled by the recurring appearance of the listing in my watch list that I checked it out further because I thought something might be wrong with the MLS functionality. I was not interested in the listing, just the anomaly of it’s persistence in the watch list and wondering how that could be.
So, what is the result of the agent’s price dropping tactic? Speaking only for myself, my conclusion is:
a) The seller is poorly represented.
b) The seller doesn’t know how to hire a good Realtor.
News flash to the goofy listing agent: Reminding buyers and agents of your overpriced listing almost daily doesn’t change the fact that it’s over priced. It’s been on the market over 100 days now, and dropping the price $1 each day isn’t going to get it sold quicker.
The agent is employing a foolish pricing tactic when what the seller needs is a pricing strategy and an effective marketing effort.
Tactics are not without value. Some agents always use a lot of 8’s in their pricing. Others defy convention and always list their listings at a round whole number, such as $500,000, instead of $499,990. These and other pricing tactics may or may not affect the sales effort, but they are all 100% useless if a home is not priced in the correct range and prepared properly, neither of which can be said about this listing.
The best way to handle a listing that isn’t selling is to review the most recent market activity to see if something has changed. It’s also important to have already contacted every agent who’s shown the home to gather feedback that can be shared with the seller. A good listing, priced to sell fast, will be in the top 1/3 of condition, compared to the competition, and in the lower 1/3 of the price range, compared to the competition. Once a determination is made that the condition is as good as it needs to be, a new price should be set based on a fresh market analysis and the level of seller motivation.
Finally, what the agent is doing would probably result in a finding against him if an ethics violation were filed with either TREC or the Austin Board of Realtors. Article 12 of the Realtor Code of Ethics states that “REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public.”
I’m not sure if knowing that buyers will be notified each day of a “price change” via the search portal set up by their agents constitutes “advertising” or a “representation” to the public, but it can certainly be said that an ordinary person would believe a “price change” to be something other than a drop of $1.00. One dollar is not a bonafide price drop, especially done multiple times in succession. The agent is not “being careful” to “present a true picture” but is instead trying to use deception and trickery to promote the listing. That’s not allowed, it’s bad business, it’s embarrassing to the real estate profession and it doesn’t work.