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, and 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 lowering 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 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're 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 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.
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 if things pick up.
If you're making a habit of hanging around during showings, you should change it. 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 like 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 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 ones that had price reductions. How many days were they on the 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.
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. In many cases, 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.
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 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 if a price drop is the right decision.