Every home seller expects their house to sell quickly and for the price they want. That’s why they listed their home in the first place. But it doesn’t always work out that way, and they may need to reduce the price.
Nationwide, 19.6% of home sellers lowered their asking price in November 2022, down from 20.9% in October as the housing market continued to cool for the first time in years.
Setting the right listing price from the outset is very important. Generally speaking, the longer a home is on the market, the less likely you are to sell it for the price you wanted. You want to set a price that attracts serious interest and entices potential buyers to make an offer. When there doesn’t seem to be a lot of interest in your home, you may need to offer a price reduction.
Even when you do everything right, sometimes houses don’t move off the market like you’d hope. You’ve hired a real estate agent who performed a comparative market analysis to determine your home’s value. You’ve hosted showings and yet nobody is making an offer.
There may be a lot of maintenance needed that a new buyer doesn’t want to take on, your curb appeal may be a bit lacking, your marketing could be attracting the wrong buyers.
There are many things that contribute to a house staying on the market for too long, but they all fall under the same umbrella: price.
If the price is right, a buyer will look past any issue, so lowering the price of your home may help you sell it faster.
There are a number of ways to determine if your house needs a price reduction. These indicators will help you know if it’s time to lower your asking price.
One of the most important factors in any comparative market analysis to determine a home’s value is the sale price of similar comparable homes in the area. You may feel your house is worth $30,000 more than the Johnsons’ house that sold last month, but the market may not agree with you.
Finding the right asking price requires some subtlety but if your 1,500 square foot, 3 bed/2 bath home costs $30,000 more than a home with the same specs down the street, buyers will prefer the house down the street.
Serious buyers want to see the house before they make an offer. If you don’t have a lot of foot traffic, you don’t have a lot of serious buyers. If you’re struggling to fill open houses, it’s not a good sign. Open house traffic tends to drop off after the first two weeks so if you aren’t getting any traction in the first week, your price is probably too high.
Likewise, if you haven’t gotten any offers after the first couple of weeks, it’s a good indicator that the price is too high. If you house is listed on an online service, you’ll be able to see how many views your listing has. Many online views combined with little in-person interest is an indicator that it’s time for a price adjustment.
People are showing up to open houses, making appointments to see the house, and showing real interest, but all of your offers are below your asking price. If buyers aren’t motivated to get into a bidding war for your house, that shows that your house might not be quite as hot a commodity as you hoped.
But, the fact that you have offers at all indicates you may not be too far off market value. You may just need to negotiate down to an offer rather than reduce your price on the market. Your agent should be able to tell you what's the best course of action.
It’s a good idea to get a home appraisal before putting a house on the market. An appraisal is an objective evaluation of a home’s value and it can be very useful when choosing an asking price.
If an appraisal is below what you wanted to list the house for, take that into account before going to market. If you choose to get an appraisal done after the house is on the market, it’s an easy way to figure out how much you should lower your asking price.
Learn more about selling a home for more than the appraised value.
The phrase days on market refers to the amount of time between when a house is listed to when it goes into contract with a buyer. In June 2022, the national median days on market was 32 days, but it could be as little as 14 days in hot housing markets.
Every area is different so check with your agent to see how fast nearby, comparable homes are selling. If your home is lagging behind on the market, you may need to change your marketing strategy or reduce your asking price.
Learn more about how long it takes to sell a house
Most experts agree that if you decide to reduce the asking price for your home, you should do it within two weeks of initially listing it for sale. In a seller’s market, you may have a little more flexibility but the longer your home is on the market, the more buyers will wonder why it hasn’t sold. They’ll use that time on the market as a negotiating tactic to lower their offers.
As we mentioned, the national median days on market is 56 days, but you will likely see the most interest in the first three weeks of listing the home. You’ll know quickly if you’re drawing only mild interest, based on the aforementioned factors. When you have an idea that your home may be listed for too much money, act decisively and lower your price while you still have some buyers sniffing around. In October 2022, homes that were on the market more than 120 days reduced their prices by an average of 15.8%, according to Lawrence Yun, Chief Economist for National Association of Realtors.
Related: When is the best time to sell your house?
If you decide to reduce your asking price, you need to do it wisely. Before publishing the price reduction, make sure you’ve exhausted all other measures, and you’re positive that it’s the right price.
Go through your marketing plan and make sure you’ve uploaded the best photos and videos you can to the multiple-listing service (MLS). Ensure your online listing is complete with a description of all your home’s perks and the benefits of the neighborhood. Finally, don’t be afraid to ask for feedback from potential buyers who toured the home but didn’t make an offer. They’re a great resource and could help you identify another problem other than the price.
Once you’re sure you’re going to pursue a price reduction, keep the following in mind.
As we’ve mentioned, a price reduction should happen in the first couple of weeks of listing your home. It’s important to be realistic when setting a new, lower price. Consult with your agent early in the process and be ready to make an informed decision on a price reduction that you’ll be happy with.
Many listing services offer neighborhood data to let you see what other sellers are doing. If they’re cutting prices as well, it will help you decide when to drop your price and by how much. You don’t want to be the most expensive of several similar houses on the block.
Rather than making several small cuts hoping to drum up interest, make one slightly larger cut that’s enough to jumpstart interest in your home. According to some reports, the average price reduction is 2.9% of the initial list price.
No seller wants to reduce the asking price of their home. Sometimes, however, you don’t have a choice. If you’re going to lower your house price, make sure you do it when you can capitalize on the interest in your home. A price reduction of a few percent within the first two weeks of listing your home could get your home off the market faster for a price you’re satisfied with.
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