I always say there a two things that sell a house: price and time. In most cases, time is of the essence in a home sale which makes price the biggest factor. As real estate professionals we do our best to suggest an accurate list price from the beginning, but the market is always changing and a price reduction may be the answer.
Reducing the price of a home often gets a bad rap. Sellers want to get the highest price for their home and to them reducing their list price conflicts with that. Another reason my sellers tell me that they don’t want to take a reduction is because they are afraid that potential buyers will see the reduction as a sign that there is something wrong with the house. In my experience a price reduction doesn’t detour would-be buyers, in fact, the goal is just the opposite. It should re-mobilize the real estate community. Pricing your home just 10% above the fair market value may cause you to miss out on 40% of your potential buyers.
WHEN to reduce:
- If there is little to no activity your first two weeks on the market
- The first two weeks of a listing should be your biggest boom. There are always exceptions to this rule but if you’re not getting any showing requests that’s a major indicator that you’ve priced your home too high.
- Before your neighbor does
- Don’t chase the market!!! If there is a lot competition in your area you’ll need to reduce your list price BEFORE your competitors. If you wait too long you’ll most likely need to reduce your price even further if the market prices decline ahead of you
- When time isn’t on your side
- When you have a target date that you need to sell your home by consider a price reduction to help you meet that deadline. It also may be time for a reduction if your home has been on the market longer than the average for your area. I believe that days on the market (DOM) carries a much bigger stigma with buyers than price reductions. The longer your house has been on the market, the more negotiating power the buyer will assume he/she has.
- I may also suggest price reductions towards the end of the “selling season,” especially if my sellers are hoping to close on their home before the winter starts. The real estate market is the strongest March-May with June-August close behind. Taking a reduction in later months can help re-energize the interest in your home and may help you stand out from the competition.
HOW to reduce
- A price reduction for reduction sake isn’t going to make much of an impact. To really change your outlook and broaden your net of potential buyers I suggest price reductions in the 3-5% range.
- Ignore what you paid for the house and the cost of the improvements you’ve made. That won’t determine what a house will sell for- only the market will decide that.
- Without “wiggle” room. Sometimes my sellers want to leave “room to negotiate” and over inflate their asking price accordingly. This strategy can lead you to price yourself out of the market. Don’t make the same mistake when discussing a reduction with your agent. Price the home according to market trends and worry about negotiating once you actually have an offer.
Last spring I listed a beautiful home on Seneca Lake. Our initial listing price wasn’t attracting very much activity. The sellers trusted me and we agreed to reduce the price 5-7% a month until activity picked up. We received two full-price offers just five days after our last reduction. Because we were aggressive with our pricing strategy, their home sold 50 days faster than the average lake listing for 2015.