Whether you call it a "price reduction," an "improvement," or an "adjustment," nobody wants to hear about lowering prices except a buyer. In a buyer's market or a slow period, it's not unusual for sellers to point fingers at agents, or for agents to point fingers at sellers' unrealistic expectations for a price.
Still, there are some times when lowering your asking price is the right move. Before you do, there are a few questions to ask yourself so you can determine your home-price-reduction strategy.
- If you are trying to sell in a buyer's market, it may be wiser to take your home off the market for a while rather than lower the price.
- Aim for no more than one price reduction, or buyers may think there is something wrong with the home.
- If your home still is not selling, ask a friend or neighbor for an outside perspective on how it may appear to buyers.
- You may need to change your marketing, look at similar listings that have sold, or create a new listing entirely in order to be able to sell your house.
Are You Selling in a Buyer's Market?
Demand falls when the market is slow, and inventory is high. If that's the case, and you don't absolutely have to sell right now, then it may be wise to take your home off the market until things improve. You might be better off renting your house or staying put until the market rebounds if you're not highly motivated to sell.
Did You Start Too High?
If you initially priced your home too high, you'll have to continually reduce the price until you hit that "magic" number. This kind of move is referred to as "chasing the market down," and it's not a good thing. Buyers will begin to wonder whether 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.
As a general rule, aim for no more than one price reduction.
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 whether things pick up.
If you're making a habit of hanging around during showings, you should stop. An owner's presence often makes buyers feel uncomfortable. Leave your prospective buyers to look around in peace, and don't turn down showings simply because you don't want to get out of 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.
How Is Your Marketing?
If you feel that the market is right for your asking price, and you're not doing anything to get in the way, you might want to look at your marketing efforts. Before you reduce your price, consider whether you and your agent are making every effort to sell your home for what you think it's worth. Questions to ask include:
- How many hits has your listing received in the 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 prospective buyers?
- Are you offering enough compensation to selling agents?
- How many showings have you had?
Watch Other Listings
If you do decide to reduce your price, it's important to be strategic about it. Pull up pending sales, and find some that had price reductions. How many days were they on the market (DOMs) before the price was reduced? 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 DOMs 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 lower than anything else on the market.
Properties that are priced below what buyers are readily willing to pay will receive multiple offers. That is the case even in distressed markets as home prices slide into downward spirals. In many cases, it's common to see a price war develop among buyers who are competing, which then results in an accepted offer for more than the list price.
Consider a New Listing
You might want to take your home off the market and put it back as a new listing at a different price so that 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, so this strategy can help you avoid the stigma of a price reduction.
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.
The Bottom Line
Every seller wants to get the most they can for their home, and you should explore every alternative before you make a price reduction. But sometimes even a small price change can make the difference between a quick sale and watching your home languish on the market. An experienced agent should be able to help you answer the right questions and decide whether a price drop is the right decision.
Frequently Asked Questions (FAQs)
How often should I drop the price of my house?
You can drop the price of your house as often as you feel comfortable doing so, but there are reasons you might not want to reduce it more than once. Buyers could think there is an issue with the home that caused earlier homebuyers to skip over it. Before you repeatedly drop the price, you might consider working with a real estate agent to learn other strategies for attracting sellers.
What is the best day of the week to reduce house prices?
Some sellers try to perfectly time their listings. For example, some real estate agents send automated emails to clients with new MLS listings every Friday, so a seller may want to list their home on the MLS early Friday morning to ensure they're included in these sorts of promotions. Check with a local real estate agent to see if they know about any of these sorts of patterns in your area that you could use to advertise your new, reduced price.