The goal of every home sale is to sell high, but when a house lingers on the market for longer than anticipated, the sellers may need to consider a price reduction.
Reducing your asking price, however, is a move that has to be handled carefully and timed appropriately, say real estate experts.
Ask different real estate agents when they advise making a price cut, and you’ll get a variety of recommendations — although the general consensus is within a few weeks of listing a home for sale.
“It depends on the local market, how many days on the market that are typical for the region, how the property compares to other similar homes that have received offers, and other factors,” says Cori Mc- Grath, Realtor with Olde Port Properties in Portsmouth, N.H. “If a home has had several showings with no offers and has no other stigmas, then it’s time to drop the price.”
For Greg Williamson, senior vice president at Douglas Elliman Real Estate in New York, a solid month is the rule of thumb.
“If there is no offer in four weeks, then it’s most likely not priced right,” Williamson says.
If the seller needs to move quickly, a price reduction may be necessary much sooner — every 10 to 14 days, suggests Sue Goodhart, an agent with McEnearney Associates, Inc., in Alexandria, Va.
When it comes to deciding the amount to discount, agents equally differ in opinion.
“The reduction has to be meaningful but not necessarily a set number,” says Glenn S. Phillips, CEO of Lake Homes Realty in Birmingham, Ala. “It’s often based on how off the market the home is prior to a reduction, so a set percentage can be dangerous. For example, a 10-percent reduction on a home that is priced 20 percent above the market is not as meaningful as 5 percent off a home that is already at expected market pricing.”
McGrath says most properties in her area sell within 5 percent of the listing price, “so I typically recommend a reduction of about half that (2.5 percent).”
However, many professionals caution that listing prices (including reduced prices) should fall within big, round number search parameters so that house hunters shopping online — where most home shopping begins — can more easily find the property for sale.
“A home priced at $412,000 would not appear in searches for homes priced at $400,000 and less, so a reduction to $402,000, for example, still does not introduce the home to buyers that top out at $400,000,” says Phillips.”
Given the current real estate climate, which favors sellers in many markets, a price cut may not be needed at all — especially if the home was priced correctly from the start based on comparable properties, low inventory/high demand conditions, and the patience of the seller. But sellers that are considering a discount should consult closely with their agents.
“The consideration should never be, ‘Let’s cut a little and hope it gains attention.’ It should always be, ‘What positions this house over the competition for buyers’ attention and money?’” Phillips says. Before making a reduction, think about how it might impact the ultimate sales price, be aware of your bottom line, and allow for some wiggle room in negotiations. Lastly, realize that there’s no shame and little risk in having to lower your price.
“One or two price reductions are fine — it shows that you are a real seller,” Williamson says. “However, three or more price cuts suggest a desperate seller, lack of confidence and that the property was priced incorrectly from the onset. So, it’s better to do one substantial price cut rather than two or more.”
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