Home sellers who have been on the market for 30 or more days and are tired of not selling may eventually consider a price reduction – but by how much?
There are a number of reasons why a home isn’t selling. Thankfully, you don’t have to be an expert on why – because price will fix anything:
- Inferior location
- Funky floor plan
- Repairs needed
- Market conditions
- Few or no comps
- Struggling economy
- Low zestimate
- Listing agent
- Bad weather
- Bad neighbors
Buyers are willing to pay within 5% of the list price. So if you are getting showings and offers, then the list price is about right.
If you’re not getting offers, then the list price must be more than 5% wrong.
Won’t buyers make an offer, even a low one? No – it’s too easy for buyers to stay on the fence while they wait-and-see, rather than make a low offer. In fact, we rarely see an offer that is lower than 5% below the list price because buyers would rather not bother – plus they don’t want to offend anyone.
A proper price reduction re-ignites the urgency and enthusiasm in buyers, which makes them want to write a good offer.
How much is needed to get buyers to engage?
Lower the price by 5%.
You see sellers lowering their price by 1% or less, but that’s not impressing the buyers – if anything, it reminds them that your price is still wrong because it still looks too much like the old price.
Lowering the price by 5% not only re-engages the existing buyers who are considering your home, but it also picks up a new set of buyers who weren’t looking as high as your previous price.
It may sound bold, but what else can a seller do to regain momentum?
Two things: a) Complete repairs/improvements to bring the home’s value up, or b) cancel the listing and try again a few month later.
If you don’t want to bother with repairs and really want to sell now, then do this exercise:
How does your home compare to the active listings priced at 5% below their current price – are you winning that test? Is your house the best of that bunch? Find the group of active listings where your house is the obvious winner, and you’ll know the price that will work.
If 5% sounds like too much, and waiting longer for that perfect couple with 2.2 kids to come along is easier to swallow, then no problem. It could happen.
But if you’re tired of waiting and will consider a price reduction, then 5% is the recommended amount – which isn’t giving it away. It’s just recognizing that the initial list price was too optimistic, and a more-realistic price is needed.
Smaller reductions won’t cause buyers into doing anything different than they’ve been doing – waiting for a fair price/value for today’s market.
Just food for thought – not saying you need to lower your price.
Oh wait, there are comps that justify the price!
Reasons why those comps aren’t reliable:
1. Buyers could have been crazy or drunk with money.
2. Buyers may have had a unique reason to buy that house (family next door or down the street, buyer worked nearby, school was nearby, etc.)
3. Market could have been hotter then.
4. Comps had superior but unrecognized features.
Give the evidence in front of you the most weight – are there showings and offers?
Won’t there always be more buyers coming to town?
Yes, but they are better educated than ever. Every buyer I see has been doing their homework on the internet prior to arrival, and they know the market as well as those who live here (consumers and agents).
The days-on-market metric is public now, and is the indicator they use to gauge pricing accuracy. It is the first question I hear at open houses too: “how long have you been on the market”