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When should you drop the price?

By Trulia | Published: Oct 14, 2009 | 38 Comments

It's a tough call. Naturally you want to do everything in your power to avoid giving up any hard won equity in your home, so adjusting the price is always a last resort. The question is - What's the best timing? How long do you wait from the time your home hits the market until you pull the plug - a week, a month, ten days? To answer this question we have to explore how buyers come into contact with your home's price and then ultimately how they measure it against other similar homes.

Something magical happens the first day you list your home for sale. Like the new kid at the high school dance, all eyes will be upon your listing. At that moment buyers and agents make some rapid judgments. Is the home overpriced? Is the home in good condition based on the photos? Is the home in a good location? This first impression will shape how many showings you receive during the first few weeks the home is listed. If you receive very few showings, or no showings, during the first two to three weeks after the listing has hit the market, you have a problem. The market as a whole is rejecting your value proposition. There is only one solution: adjust the price, and the faster the better.

Why not give it more than just a few short weeks? Think of the real estate market as an audience in a movie theater. As soon as your home hits the big screen the group collectively decides if they like the picture or not. More time won't change their mind. If your home has seen little or no activity, it's been decided that your home got a thumbs down. The only thing you can hope for now is that new audience members will trickle in, new buyers entering the market, who will, against all odds, fall in love with your home and nominate it for an Oscar. A better bet is to edit your price and re-submit it to the academy.

There are also other times when a pricing adjustment may need to be considered. For instance, let's take a look at Joe and Jane Seller's listing price below.

Competitor Home A:$368,000
Competitor Home B:$349,000
Joe and Jane Seller:$345,000
Competitor Home C:$345,000
Competitor Home D:$333,000
Competitor Home E:$329,000

Joe and Jane appear to be very competitively priced relative to the market. But let's see what happens 30 days later:

Competitor Home A:Expired
Joe and Jane Seller:$345,000
Competitor Home B:$339,000 (Reduced Price)
Competitor Home C:$335,000 (Reduced Price)
Competitor Home D:Sold
Competitor Home E:Pending
Competitor Home F:$326,000 (New Listing)
Competitor Home G:$325,000 (New Listing)
Competitor Home H:$319,000 (New Listing)

Joe and Jane went from being very competitively priced to being the highest property in their price range. From a buyer's perspective, their home now offers the worst value proposition in the marketplace. The interesting part of this scenario is that most sellers like Joe and Jane would never know the market winds had shifted so far and so fast. Why? Most sellers only request a market analysis at the beginning of their relationship with a real estate professional. Instead, homeowners need to stay abreast of all market activity in real time. How? One simple way is to use the internet. For instance at Trulia you can receive automatic updates on prices changes and new listings as they hit the market, or check out the latest market Stats & Trends. This is critical information that can be invaluable to creating a competitive pricing strategy.

Comments

By Rita Legan,  Thu Oct 22 2009, 13:29
This is so true and the fault of the agent or FSBO who is marketing the listing. A Market Analysis needs to be sent as the subject market changes. We have an application that includes all market activity, auto updating so the Sellers know their market 24/7. We also employ a showing feedback service, which allows the showing agent to offer their buyer's opinion on the shown property and the seller and agent can receive this valuable feedback, which allows them to react quicker and strategically. Lastly, I find it allows the showing agent the comfort of not speaking to anyone and giving feedback at their own convenience-critical.
By Nick Alameddin,  Thu Dec 24 2009, 16:34
Some times sellers think there is not enough marketing being done. In most cases doing marketing will not help if the home is over priced. If no offers come in within the first 2 weeks, I believe that the house is over-priced. Time to think about a price reduction.
By Brad Bergamini,  Wed Dec 30 2009, 17:26
I love this post. When sellers play the game to match the market they tend to stay on the market for too long and have to drop price to sell. The seller that plays to win will sell faster and for more money.

Find out whether you are a winner or just one of those that likes to match the price of others on the market.
By Jeanne Feenick (908) 337-0943,  Tue Jan 12 2010, 22:53
A topic close to my heart! Without fail, homes that are priced properly right out of the gate sell faster and for more than homes that are priced high and attempt to catch the market overtime. I have found that across price points and markets, home sell within a 0-5% band of their asking price when that price is deemed by the buying public to be the "strike price". The smart sellers price right from the get go and capture the attention and enthusiasm enjoyed during the first 60 days of the listing. Others wait it out, and only reach their strike price after multiple price adjustments. Same rule applies with eery consistency - within a 5% band of asking.

We have a tool we use to guide a price reduction discussion. It reviews one example after another from our own inventory of homes that have gone through multiple reductions and then wa-la, strike price reached, and bingo, home sells within 5% band of that price. I say to my sellers, we can wait and have this discussion, or we can be smart and avoid the inevitable outcome of poor pricing decisions now. Based on my experience, the seller that prices properly out of the gate will sell for more, not less, than the seller that does not.

If you want to get top dollar for your home, align yourself with a good agent that has the courage to tell you the truth, and listen.

All that said, yes, if your home has not sold, an adjustment in price must be considered. The surest feedback that the price is right is if it attracts interest and visitors, and ultimately an acceptable offer. Low or no traffic, and/or no offers, price needs to be revisited.
By Colleen Basinski,  Thu Feb 11 2010, 11:52
Great Post! And great example of what actually happens with competing properties on the market. Waiting longer than 3 weeks for a price reduction only allows the property to sit longer unsold, making any offers that do eventually come in even lower, because of the "stale" property and long market time.
By Ken Tracy,  Thu Feb 11 2010, 12:01
My listings will have a contract within 90 days. If they don't, they are overpriced...
By Cyndi Bell,  Wed Sep 8 2010, 10:17
Our code of ethics require that we present the seller their current market value. "Standard of Practice 1-3 REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value."

I've gone on listing appointment where sellers want to place their home over market price. In my opinion taking an overpriced listing is misleading the seller about their homes market value. I won't do it.
By Fran Rokicki,  Wed Sep 8 2010, 16:58
If my clients have many showings, but, no offer, I do suggest a price reduction. If many people have come through and not liked the home enough to make an offer, a price reduction may just help them to do so.
By Ann Engel,  Wed Dec 29 2010, 17:15
If a seller insists on pricing his home too high, most likely he will end up missing the market and selling for much lower than if he had priced it right in the beginning. Most buyers ask how long a house has been on the market. They will come to the realization that it is overpriced.
By Aaron Schreiner,  Tue Mar 1 2011, 12:04
You could always drop it and if it doesn't sell take it off the market for a short period of time to evaluate the situation.
By Whitney Long,  Tue Apr 26 2011, 11:02
Great article!
By Buy and Sell House Fast,  Mon May 23 2011, 01:27
In a somewhat challenging market, in which there are numerous homes for buyers to choose from, in many cases the final decision comes down to the price of the home.
http://www.buy-and-sell-house-fast.com/sell-house/price-your-house.shtml
By Deborah Griffin,  Mon May 30 2011, 08:10
Great post! There truly is no magic secret about selling a home. If the home is in good condition, priced properly and has the maximum exposure to all potential buyers…it will sell. The best priced home in the world won’t sell without proper exposure, and the best exposed home in the world won’t sell without an appropriate listing price.
By Deborah Griffin,  Mon May 30 2011, 08:11
Great post! There truly is no magic secret about selling a home. If the home is in good condition, priced properly and has the maximum exposure to all potential buyers…it will sell. The best priced home in the world won’t sell without proper exposure, and the best exposed home in the world won’t sell without an appropriate listing price.
By Barbara Lang,  Fri Jun 3 2011, 12:54
With so many Short Sales and Foreclosers in the market it is to tdvanage to follow the market. If the market is going up, might want to price high. If the market is going down you need to reduce to stay ahead of the maringket. If the buyer is financing, the bank will not let them pay for an over priced listing.
http://www.fishing4homes.net
By Mildred Valentin ( Bronx #1),  Fri Jul 15 2011, 14:09
I have listed a 2 bedroom condo in Parkchester really have had no showings requests but traffic on the internet. Have asked homeowners to reduce price to be competitive with other listings in the area at least by 5k. When should you reduce after a month on the market or two?

Millie
RE/MAX Voyage
By Lynn911.com Dallas Realtor,  Sun Aug 21 2011, 19:10
If you have a great property own makes it much easier to drop the price
By Joanne Bernardini,  Thu Sep 15 2011, 05:26
It has often been said that the most 3 most important factors in real estate are location, location, location! I think it should be modified to "Location and Price!"
Joanne Bernardini
http http://:www.OCNJBeachHomes.com
By Carmen Brodeur- Top 1% Realtor,  Tue Nov 29 2011, 23:05
If the home is not getting enough showings, it is usually the price. Keep dropping until there is sufficient activity and interest.
By Shawn Rosa,  Tue Dec 13 2011, 10:32
assuming the home is being marketed properly, drop the price when few showing are taking place or if many showings are taking place and no offers are being made
By Rick Remijas,  Tue Feb 14 2012, 09:05
The market is the master today. Constant communication with sellers regarding new listings, contracted properties and closed sales is necessary to maintain a relevant and competitive position in the market. I work in communities with access to Lake Michigan and a wide range of housing styles, sizes, amenties and access to recreation. Consistent delivery of information in real time is essential as background to pricing discussions.
By Lisa and Goran Forss (Broker),  Mon May 7 2012, 12:38
Price it at market with extreme marketing, and pre-announce it (coming soon listing). We generally have multiple offers the first few days provided it shows well, marketed well and priced at the market price. We also offer a program where the seller agrees to a set price reduction provided we agree to pay for mortgage payments up to a certain limit. It's an optional program we offer.
By Matie,  Tue Jun 26 2012, 05:12
Some times sellers think there is not enough marketing being done. In most cases doing marketing will not help if the home is over priced. If no offers come in within the first 2 weeks, I believe that the house is over-priced. Time to think about a price reduction.

http://www.indexpost.com/
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By Sona Gallatin,  Sat Aug 18 2012, 13:18
I would ask for feedback from people who have seen the house. See what the draw backs might be, is there a way to fix it? During the listing have your agent pull a current title report showing recently sold in the neighborhood, check a few out and compare to your home. Make adjustment on price if if you need to.
By Jennifer Fivelsdal,  Fri Oct 5 2012, 21:28
I am puzzled why some sellers fail to adjust pricing even when getting feedback from potential buyers. Having showing but not getting offers is an indication property is overpriced.
By Mark Harrison,  Sat Oct 20 2012, 17:22
I believe so many agent are caught up in just getting the listing. We are suppose to be the experts: if a seller truly insists on overpricing there home it may be better to walk away from the listing than to try and fight a losing battle It cost allot of time and money to market a listing the right way. Nothing worse than having it sit with no offers. This is a seller who says if i get my price i will sell. I tell them up front if we price the home properly from the beginning we will generate multiple offers.
By Jessica Hood, Realtor & ASP,  Sun Jan 6 2013, 16:40
Great article. I wish more sellers would have "open ears" when it comes to market value. And that fewer Realtors would be so accomodating as to sell a prospective listing client anything that they want to hear. In the end, that kind of "marketing" costs the seller $1,000's of dollars.

We gauge our price decreases on the number of showings. If we have 10 buyers through the house with no offers the price needs to move. We can do this confidently because all of our properties are properly staged and prepared with no showing issues. http://www.fortmeadehomes.com.
By Montana 406 Real Estate,  Tue Feb 5 2013, 11:23
In general - "don't chase the market"...it takes longer to sell and usually costs the Seller both time and money.
By Debbie Starnes, Realtor,  Fri Mar 8 2013, 06:31
Great information! In my area I suggest the seller reduce the price within the first 30 days of listing if there's been no activity. Now, with that being said - I make sure that I have heavily marketed the property within the first 2 weeks of listng for maximum exposure.
By Lori Warren-ferris,  Fri May 24 2013, 06:44
I've reduced the price of my house, now what should I expect? If I don't get more showings or an offer, how long should I wait to take it off the market? My home has been listed for 30 days, 3 showings and an open. No offers. Remarks are, my home is beautiful and well priced. Now what??
By Kim Loizzi,  Thu Jun 13 2013, 11:47
This scenario has been around for a while. Another tip I like to use is if you are not getting any showings drop the price by 5% every 30-45 days. If you are getting showings but no second appointments drop the price 3%. If you are getting the second showing but no offers drop the price by 2%. This should be done every 30-4 days in order to stay competitive and ahead of your competition. We are seeing a lot of multiple offers across the board.
By Christina Murphy Mazgelis,  Wed Oct 23 2013, 10:16
List with an agent with who doesn't float your boat. Pricing it correctly the first day is key. If your agent has done all they can in the first 2 weeks and you are not getting any activity REDUCE THE PRICE. The longer it sits the harder it sells. In the first 2 weeks the agent should have it listed in all internet sites with pictures. Have their company tour, have their local MLS tour,have sent out Just Listed Postcards, have called a radius of your neighbors,have an Open House, have a broker luncheon and have kept in touch with you. If all this does not work... It is the price. Please contact me with any questions.
By Greg Carrigan,  Thu Nov 14 2013, 12:15
It can be a big disservice to price a home above market value, in most cases sellers think their property is worth more than it really is. The seller has some sort of attachment to the property and is unwilling to look at reality. I had a client the other day who had a property that expired with another agent because they were not willing to budge on price. They wanted a set amount 30k above market price, this being said they did not have a hidden gem and it was a less desirable location. The house had been on the market for over 800 days, which says a lot about the price, it was just way high.
Selling your home above market value may seem like a good way to possibly getting more cash, but in reality it just will sit and you will have ended up with less cash than expected. Looking at the current market of your home you must constantly stay competitive and keep an eye on what is selling and for how much. The client may have had all the time in the world to have their home on the market, but the actual gain from having it there for so long goes away. It’s a harmony of balance and give and take, sometimes you have to be real in what you want and what you will get. Sometimes you have to give a little to get anything.
By User101,  Mon Jan 13 2014, 19:06
What kind of marketing strategies should agents use apart from waiting for buyers to make a move. In my opinion MLS listing alone is not sufficient.
By S2h0a1d3e,  Mon Feb 17 2014, 09:55
Thank you for the post! The best priced homes are often sold rather quickly, but the seller should always follow the market and the listings to be aware of his chances, if it's difficult to sell without an appropriate listing price, it should be reduced.
Jull http://personalmoneyservice.com/
By Lance Watkins,  Mon Mar 3 2014, 12:57
Agents must be in touch with the market, to ensure that after initial listing - that the property doesn't remain overpriced. Consistent and pro-active communication with the sellers will help during any pricing adjustments.
By Jay Taylor,  Sat Mar 8 2014, 10:17
Although the topic and many of the posts appear to be old, the problem persists. There are so many properties which languish on the block on account of faulty pricing. Therefore be very careful in setting your price and how you go about selling your house. Opt for a good loacl realtor, be aware of price movements in the area and ensure your home is available for open house viewings. This will help in moving the house closer to a sale.

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