As a real estate agent, it's essential to understand how to correct market strategies during times of price reductions. It can be challenging to navigate a dropping market, and the game of undercutting can quickly spiral out of control. In this lesson, we'll go over the key takeaways that will help you execute strategy and avoid the chasing market.

Key Takeaway 1: Price Reductions Can be a Saving Grace

When the market starts to dip, price reductions can be a useful tool to execute a strategy in your real estate deal. The first sign of a market shift is the sitting period, where homes are still coming onto the market, but prices are not adjusting. This is the time when you should start planning, slashing agent costs, and farming hard for the type of business you want.

Key Takeaway 2: Avoid the Chasing Market

Once the market starts moving down, motivated sellers will begin to price reduce, which can quickly turn into a chasing market. You don't want to enter the rat race of chasing because hundreds of thousands of dollars can disappear off the market overnight. Therefore, it's best to be wise with clients and explain price reductions and how the chase begins.

Key Takeaway 3: Perception with the Seller

It's essential to get clear on perception with the seller. Just because the market went up doesn't mean it's real money unless you sell your home. When the market starts to shift, it's time to have a discussion with your clients. Although their house was worth X yesterday, they must understand that the money never existed until they sell their home.

Example 1: The Sitting Period

During the sitting period, it's essential to have a strategy in place. Suppose your client has a house that's been sitting on the market for a while. In that case, you should start planning and farming hard on the type of business you want, avoiding everything else. By doing this, you'll be able to execute a price reduction strategy without entering the chasing market.

Example 2: Understanding Perception

It's essential to have a conversation with your client and get clear on their perception of the market. Suppose their house was worth X yesterday, but the market is shifting, and the numbers show a steady decline in sales and rising inventory. In that case, you need to explain to them that the money never existed until they sell their home. This will help them understand why a price reduction may be necessary.

Definitions:

1. Price Reduction: A decrease in the asking price of a property by the seller, typically due to market conditions or the need to sell quickly.
2. Chasing Market: A market where motivated sellers undercut each other, causing a significant drop in property values, and a race to the bottom ensues.
3. Perception: The way in which something is regarded, understood, or interpreted.

In conclusion, as a real estate agent, understanding market strategies and price reductions is essential. By avoiding the chasing market and executing a price reduction strategy during the sitting period, you'll be able to help your clients navigate a shifting market successfully. Remember to get clear on perception with your clients and explain why a price reduction may be necessary. If you're interested in learning more about real estate strategies, consider signing up for our door knocking master class for realtors.