Do You Consider An 11% Conversion Rate Successful?
June 27, 2008
On May 27th Coldwell Banker announced a special 10 Day Sale of nearly 1,000 homes. These homes were selected because their owners agreed to reduce prices by as much as 10%. Was this promotion successful?
Gus Rubio, a regional vice president for Sarasota based Coldwell Banker stated that the promotion would be welcomed by buyers. “For the buyer, it’s going to be a huge incentive.”
Did Coldwell Banker’s sale demonstrate the type of creative marketing real estate agencies are going to have to implement to survive and remain profitable in a down real estate market or is it just hype? It seems that some critics though it was all P.T. Barnum promotional hyperbole and it masked the true price correction needed to stimulate the market.
One thing’s for sure. It definitely beats the heck out of a “staring contest“!
Miami-based housing analyst Lewis Goodkin said “If the prices were realistic, then buyers will respond.” Beverly Rothstein of RE/MAX in Coral Springs echoed that statement by saying, “It sounds very much like a marketing ploy.”
Bob Melzer of Prudential Florida WCI Realty in Boynton Beach went a bit further, “It’s meaningless. It’s hype, no serious home buyer falls for that. he offers what he wants to offer.”
Well, the numbers are in and you can judge for yourself. The Sun Sentinel, the area’s top newspaper reports that Coldwell Banker was able to garner 108 sales contracts among the 1,023 South Florida homes that participated in a 10-day sale earlier this month. This represents a conversion rate of 11%.
Just how many of these contracts actually close is yet to be seen. That will be an interesting follow-up article to be researched over the next couple of months.
The Miami Herald newspaper states that “the results in themselves, however, may suggest, what real estate professionals have been claiming: the boom years built a pent-up demand among buyers sidelined by soaring prices, and that price declines are slowly breathing new life into the market.”
Rubio said the homes under contract range from the mid-$200s to more than $1 million. Open houses were scheduled at each participating home and potential buyers were offered discounted services and products with their purchase. The average traffic per open house ranged between five and seven people. A Palmetto Bay home listed for about $450,000 drew 42 people.
”Not even in the heyday, when we were in the real estate boom and things were selling in minutes, do I remember having 42 people at an open house,” Rubio said.
The reason: the home’s price was 26 percent lower than anything within five blocks, Rubio said. Some real estate experts have predicted prices will fall another 15 percent to 20 percent before they bottom out. Buyers sniffed a great bargain.
For some untold reason, none of the homes in the sale were bank-owned properties or foreclosures.
So now, the Sun-Sentinel, and many others are asking, was this promotion a success? Do You Consider An 11% Conversion Rate Successful? Here’s a question I have that I think is very important to consider. What about the other 89% of homes that were included in the promotion that did not sell? They agreed to participate and lower their prices about 10% each.
Now since those other 89% of homes that did not receive offers and reduced their prices 10% to participate…where do they go in the wake of this promotion? Was this promotion fair to them? Do they raise their prices unrealistically back up to the pre-promotion level or are they now faced with the prospect of lowering their prices even further to be competitive? Why were they priced in this manner to begin with?
While I applaud Coldwell banker for it’s effort, I personally I feel this promotion is a failure. Leaving 89% of your inventory on the shelf, over priced with no game plan as to how it would affect these homes is simply irresponsible. When we see the numbers…if we see the numbers, from the homes that actually close as a part of this promotion it likely may be an even worse picture.
In a declining market, who knows if 10% was even enough? Wait until the appraisers get out there and underwriting review takes place and let’s see if these 11% even close.
There’s many a question yet to be answered by Rubio and the people at Coldwell Banker. What do you think of this promotion and do you think an 11% conversion rate is successful?
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