When Is a Good Time for a Price Reduction? Factors to Consider
Reducing the price can bring multiple offers
Whether you call it a price reduction, an improvement, or an adjustment, nobody wants to hear about lowering prices except a buyer. It's not unusual for sellers to point fingers at agents, and for agents to point fingers at sellers' unrealistic expectations for a price, in slow markets and buyer's markets.
Ask yourself some questions before you slash the price of your home. Determine whether you have any other options, and make sure you know why you're doing it.
Are You Selling in a Buyer's Market?
Demand falls when the market is slow and inventory is high. Maybe you should take your home off the market for a while if that's the case and if you're not in a position where you have to sell.
It makes no sense to put an overpriced home that's not receiving any showings in MLS because it skews the numbers for market performance. You might be better off renting your house, or staying put until the market rebounds if you're not highly motivated to sell.
Have You Overlooked Anything?
Ask a friend to stop by and give you an honest opinion of how your house shows—honest being the operative word. Yes, your agent should have nailed this months ago. Your place should show like a masterpiece. But sometimes a fresh set of eyes can pick up on something that you and your agent missed. Find it, fix it, and see if things pick up.
You might be making it a habit to hang around when your home is being shown because it's just so inconvenient to go out for a little while. This might be something you want to change up as well. An owner's presence often makes buyers feel uncomfortable. Leave your prospective buyers to look around in peace.
It's an especially bad mistake to turn away showings because it's not a good time for you to leave the house.
The bottom line: Make sure you're not unwittingly sabotaging your—and your agent's—efforts before you take the scissors to your listing price.
Picking the Right Price
You'll have to continually reduce the price until you hit that "magic" number if you start out too high. This is referred to as "chasing the market down," and it's not a good thing. Buyers will begin to wonder if something is wrong with your house. They'll also wonder how much lower will you might be willing to go and decide to play a waiting game.
Ideally, you want no more than one price reduction.
Do Your Homework
Pull up pending sales. How many days on market (DOM) before the price was reduced, and how much of a price reduction was made? You won't know the sold price, but you can determine average price reduction percentages. Ignore active listings without price reductions unless they're similar to yours and the DOM are low.
Run side-by-side comparisons with active listings near the price point you're considering. Price your home so it falls in the bottom two to five listings or—if you're really determined—price it less than anything else on the market.
Dare to Go Low
Properties that are priced below what buyers are readily willing to pay will receive multiple offers. This is the case even in distressed markets as home prices slide into downward spirals.
It's common to see price wars develop among buyers who are competing, which then results in an accepted offer for more than list price.
You might want to take your home off the market and put it back as a new listing at a different price so your reduction isn't readily evident to any agents who look at your listing. An entirely new listing looks fresh and exciting to a buyer, and new buyers come into the market all the time. Not every agent studies the history of a listing.
Some MLS regulations set guidelines that must be followed when a listing is removed and re-entered. Make sure your agent's MLS allows it.
When to Lower Your House Price
Ask yourself some key questions before reducing your price. It's no small wonder that your home hasn't sold if you're not getting many hits in MLS or your home is barely being shown. There could be several reasons for the lack of activity—reasons that aren't necessarily related to your listing price. Rule them out first.
- How many hits has your listing received in MLS?
- Do the marketing comments sell the benefits or features?
- What kind of direct mail campaign has been launched?
- How many open houses have been held?
- How does the house show online? Are there a lot of beautiful pictures?
- Is your signage in a prominent location? Does it contain several phone numbers and a website?
- Do you have a virtual tour published?
- What kind of feedback have you received from agents and buyers?
- Are you offering enough compensation to selling agents?
- How many showings have you had?