If you were one of more than 25,000 owners who had a home listed with Coldwell Banker in October, you received an unusual request from your local real estate agent -- drop your price 10%. The firm hoped the national promotion, which ran for 10 days in mid October, would move many of those houses. The promotion started with considerable fanfare, but one month later, I cannot find any mention anywhere, including the Coldwell Banker web site, about how many homes sold as a result. That ought to tell us something. [Note to readers: Please let me know if you have found data on the promotion.]
Coldwell prepared for the promotion by conducting a survey of its
Coldwell Banker's promotion essentially blamed the customer for stupid pricing decisions.
agents. The company's 3,379 agents responded that 56% of their customers' prices were unrealistically high. Therefore, the firm's thinking was that an across-the-board 10% price cut would cross the threshold between inappropriate and appropriate pricing and start moving houses again. Nearly 80% of the agents observed that homes priced "appropriately" in their markets were attracting more buyers and moving more quickly, and more than ¾ believed a 10% reduction in prices would push their sellers' homes past the "tipping point."
In announcing the promotion, CEO Jim Gillespie said "we believe it is critical for Coldwell Banker, as an industry leader, to help serve the needs of those listing homes with a Coldwell Banker broker and to help move the U.S. real estate market in the right direction."
Let's be clear; there is no way that a fraction of 25,000 homes in a market with hundreds of thousands of homes in foreclosure was going to move
If the agents thought the listing prices were too high, why didn't they guide their clients to the right level up front?
anything except Coldwell Banker's own sales figures. This promotion was wrong on a number of levels, not the least of them the hypocrisy of "helping" the U.S. real estate market. First, is it ever a good idea to blame the customer? I bet if Coldwell Banker surveyed their customers today, they would find that 90% of their agents told their customers it wasn't them who responded that the customer's listing price was too high. No client's rep wants to be seen as distrusting the intelligence of his client (even if he does).
Second, any real estate agent who considers his customer's asking price too high is making an admission that he -- the agent -- did a lousy job of communicating up front. It is the agent's job to use reasoned logic to guide the client toward a reasonable price. But in this market, you can imagine that the pressure to acquire a listing is intense, and that thousands of times across the land, agents begging for a listing are saying things like, "Sure, Mrs. Jones, we can get that price even in this tough market." Then a few weeks later, "Mrs. Jones, we never expected the market to be this bad, so let's take advantage of the company's promotion and drop the price 10%." That is as icky as it sounds, the real estate equivalent of bait and switch.
Some real estate industry observers see Coldwell's promotion as less
It is a cynically clever promotion that has the customer paying all its costs.
about moving individual homes and more about the company's own suffering sales figures. Coldwell, other than the cost of a press release and communication with their agents, had little skin in this game. The discount was to be paid for entirely by their customers, as well as their own agents, whose commissions would be dinged by a shekel or two.
Coldwell missed reconciling a key ingredient of the promotion, buyers. Many of their listing clients are in competition with the hundreds of thousands of properties in foreclosure, and a 10% cut doesn't begin to approach the prices at which the banks are willing to unload their own inventories of distressed homes. And many real estate agents, Coldwell's included, are conducting "short sales" for which the sales price is less than the amount remaining on the owner's mortgage. Those, of course, drag down market prices as well. In short, the relatively few buyers able to finance a purchase with cash or to qualify for a loan have many, many low-priced alternatives.
And, finally, there are the dismal unemployment numbers, which will continue to get worse before they get better. We may be headed toward a 10% national figure if the auto industry restructures, which seems inevitable. Those without a job not only won't be buying houses soon, they also may be putting theirs on the market, priced to move quickly. That will just add to the immense pricing pressure.
Coldwell Banker had hoped that a defibrillator was just what the doctor ordered to move properties listed by its 25,000 customers and help move the housing market forward. Judging by the latest housing figures, the patient is still on life support.
16th hole, Longpoint Golf Club, Amelia Island, FL (63)
