Is reducing the sale price of a home a red flag?

Asked by Home Owner, San Jose, CA Tue Jun 12, 2012

My friend has a home that's been on the market for approx 30 days. No offers. Not in a bad neighborhood. In GREAT condition. Neighborhood is also great. Location is great as well. We think there has been no offers because the price is higher and the market has definitely slowed down in this area. Should they reduce the price of the home? If so, what day of the week would be the best to do that? How do potential buyers see such an action? What are other ways that they could improve the desirability of the home if everything else is in order?

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19
Judi Monday,…, Agent, Green Valley, AZ
Wed Jun 13, 2012
The most important factor to consider when selling a house is price especially when it is a Buyers market. Reducing a price is not a red flag and because of how quickly some markets are still changing it is really a sign of the time. A price reduction tells Buyers that the Seller is motivated and paying attention to the changing market dynamics.
3 votes
Lee Schmidt, Agent, Morgan Hill, CA
Wed Jun 13, 2012
I will start by saying that a great house, in great condition in a great neighborhood is getting multiple offers within days of going on the market. So there really are only a few reasons why it hasn't sold:
1. it's " for sale by owner"- and they don't have the experience, knowledge or time to handle the buyers who have contacted them.
2. It's priced too high
3. If it is listed- their agent isn't marketing it correctly or handling inquiries well.
4. Perhap's it's not as great as they think it is. I have found that most sellers over estimate the value, condition and marketability of their home.

If they are concerned, I'd get a second opinion from a seasoned professional.
2 votes
In response to #4 above: On the flip side, I would say that most realtors strive to underprice a home to minimize effort necessary for easiest sales :) So let's just acknowledge the obvious biases and motives on both sides of the equation.
Flag Thu Jul 16, 2015
Michelle Car…, Agent, Coppertino, AL
Sun Aug 25, 2013
No it's more like a green flag-one that welcomes buyers. Many buyers look in a set price point, say $750K or under. If the home is asking $800K it hasn't been exposed to those buyers. Reducing the price often introduces the home to a new group of buyers-which is likely to result in a sale.

No offers after 30 days on the market means the market is telling you, "This is not the right price." While it could be poor marketing, if it's on the MLS and accessible but no offers, price is what needs to change.
1 vote
Mike Walters, Agent, Hollister, CA
Wed Jun 13, 2012
Great questions!

For starters: if the home has had a lot of showings but no offers it is either the home or the price. You said, "GREAT Condition", "Neighborhood is also great". So the issue is probably price.

Their agent should review with your friend the most recent sales, pending sales and homes for sale which are similar and nearby. Then they should review the "DOM" (days on market of those most recent sales). Finally, they should adjust their home's value based on the "+" or "-" features of their home vs. the other sales.

How do you feel when the product you are looking for goes on sale? It's the same for homes. An adjustment in price not only signals the desire of the seller to sell their home but encourages the buyer that they might get a better price.

Studies show that Thursdays & Fridays are the best days of the week to adjust a home's price. Prospective buyers begin their weekend 'home shopping' on Thurs. evenings and Fridays.

Finally, a series of well published Open House events are helpful. I do an email blast to all 347 Realty World Agents in our area, send 50 of the nearest neighbors, and post blogs on my fb, Tweeter and other sites - an invitation to the open house. I entice attendance by mentioning "treats" and "give-aways".

Feel free to text or call for more ideas.

Mike Walters
831.630.3717 text/cell
Mike@CaHomes411.com
Web Reference:  http://CaHomes411.com
1 vote
Sam Shueh, , San Jose, CA
Fri Jun 22, 2012
Good question. Most home sellers sell their home based on their own needs and cared little about what the going rate is. This is why some just do not sell.

Most homes in South Bay area are in pending mode in just one weekend. If a home has shown to 10 groups with no offer, you ask what can be done to improve its desirability. After 20 groups you need to figure out if it is marketing, availability or realtor or what? Anything in the Valley sells in any neighborhood.

30 days are long time for homes not getting good offers. As you state it has "zero offer"!
A home is priced right it gets offers and buyer will fight over it. The seller has plenty of choices. But if a home is priced incorrectly even a full price offer will often not be accepted by lenders for mortgage approval. Then one has to put it back on the market start the process over. After 2-3 months few realtors will NOT want to show assuming there is something wrong with the property and look for new listings.

When the price is reduced on the MLS buyer will notice it.

Hope that helps,
Sam Shueh
Keller Williams Realty
http://www.sanjoserealtors.us/
0 votes
Sam Shueh, , San Jose, CA
Fri Jun 22, 2012
Most homes in South Bay area are in pending mode in just one weekend. If a home has shown to 10 groups with no offer, you ask what can be done to improve its desirability. After 20 groups you need to figure out if it is marketing, availability or realtor not do diligence or what?

30 days are long time for homes not getting good offers. As you state "zero offers"
A home is priced right gets offers and buyer will fight over it. The seller has plenty of choices. But if a home is priced incorrectly even a full price offer will often not be accepted by lenders for mortgage approval. Then one has to put it back on the market. After 2-3 months few realtors will want to show assuming there is something wrong with the property and look for new listings.

When the price is reduced on the MLS buyer will notice it.

Hope that helps,
Sam Shueh
Keller Williams Realty
http://www.sanjoserealtors.us/
0 votes
if a home sells that fast it's under priced in my opinion
Flag Tue May 30, 2017
Stu Carson, Agent, San Jose, CA
Wed Jun 13, 2012
There are 3 reasons why a home does or does not sell. PRODUCT-PRICE-PROMOTION & perhaps a new element POSITIONING.

PRODUCT - making the most of what you have, packaging, staging, curb appeal... the analogy would be makeup & accessories on a woman before going on a date. Statistics show a staged home sells in half the time for 4% to 8% higher price.

PRICE - all a Seller can do here is make the mistake of over pricing. The market determines value by voting with it's $$$'s. Seller and their agent in reality have no control of this other than some impact in maximizing the other 3 P's. It's the Seller's decision to set the theoretical price, but the market will determine reality.

PROMOTION - This is essentially THE fundamental value brought or more often NOT brought to the table by a listing agent. This is a combination of strategies and tactics deployed to get the home maximum "eyeballs" and then "click through" mindshare, resulting in decisions to come tour the home. For every 10-12 showings statistically you should receive at least one offer. Ironically this is where 90%+ of agents fail miserably. There are easy ways to measure this # of virtual tour hits, # of calls, # of tours. Our clients know we generate 5 to 10x's the activity on all metrics compared to most other agents. How? Why? That's our "secret sauce" which our clients & we are happy to discuss but not while other Realtors might be listening!

POSITIONING - Creating marketing messages that attract niches of the Buyer's market. Looking at the homes' "assets" strong points and asking "who is our ideal buyer"? A family with young children? Artists? A retiring couple? Horse owners? Sportsmen? etc... Positioning takes a level of marketing education, skills & experience that few Realtors possess. How many Realtors would be hired to be Directors of Marketing for some of the world class companies in the Bay Area? Check out my resume. But even among those that could and would, a small % of those are masters at POSITIONING which takes a level of marketing talent bordering on genius. You're welcome to talk with our clients.

I have a philosophy on price, I call "Market Dynamic Pricing". The price of a home is fluid, like all market places it fluctuates based upon many factors weekly, not the least of which is competitive homes on the market. The reality is that typically at any one time in most markets, there are actually just a hand full of competitive homes (2-5). Think of the competition as the homes that a Buyer of your home is likely to tour the same day they see your home. You want to be the best value proposition among that handful of competitors each week you are on the market. You want it to be clear after those Buyers tour your home and the others, that yours is the best overall value. Otherwise you will watch the other homes sell week after week before you do.

So think of a 3 legged stool. Without one leg, we've got problems! That's how it is with getting a home sold in the least amount of time at the best possible price. Missing or weak on any one of the 3 P's and it's going to cost the Seller even at the low end of the marketplace 10's of $1,000's of $'s. On the high end above $1mil could easily be $100's. It's been validated dozens of ways statistically... don't sell a home in the first 30 days, and that usually costs the Seller 3% to 6% of the value of the home. Take more than 60 days deadly. 95% of the time, my team and I get the job done in 45 days or less. That's why we can offer our "Put our money where our mouth is, Pay for Performance Listing Agreement". If we don't sell the home in 60 days we will continue to use our "secret sauce" to get the home maximum exposure, BUT you pay us $0 at close of escrow. We still have to offer the Buyer's agent a commission, but we didn't deliver on our commitment, so, we don't get paid! ZERO DOLLARs

So back to your specific situation. The home didn't sell. It was either Price, or Product, or Promotion... or a combination of more than one. There's no magic in figuring out which "leg" or "legs of the stool are weak", that is IF the agent is gathering data/market metrics (most don't). Identify the weak leg(s) take corrective action, measure the results. Time is of the essence. If you have any doubts or concerns about the level of marketing expertise of your Realtor, GET REAL! there is too much at stake, interview a few & hire a new one. I don't care if it was your neighbor, brother, friend or golf partner your hired! About everyone in CA has a Real Estate license now, less than 1 in 100 know what their doing. GET REAL there's $10's of $1,000's of YOUR hard earned $'s at stake! Could your listing agent qualify to be DIR of Marketing for the company you own or work for? Why not expect that level of excellence from your Realtor???

Stu Carson
http://www.JustMyProperties.com
http://www.GetRealRealtor.com
Kaizen Group of Keller Williams
408-209-0849
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Wed Jun 13, 2012
Real Estate is much easier than many people (including agents) make it. When homes aren't getting shown regularly there's only one reason: "The Price" Many homes simply aren't priced right to begin with and all this does is add on Days on Market which always comes back on the Seller as buyers interpret higher Days on Market as an invitation to bargain hard. Reducing the price is not a red flag, it simply indicates a pragmatic Seller responding to market condition.

There's no particular day of the week that's better or worse for dropping the price, though I often choose Friday's so that the new price is in effect for the weekend. What your friend should consider is that incremental price reductions serve no purpose other than setting the stage for future price reductions. If the price is going to be reduced do so in a significant manner 5% at a minimum, perhaps 10%. The listing agent should be showing your friend current sales information so they can see what the market is actually paying for comparable homes. They should also consider how much inventory their competing against in comparison to how many similar homes have sold with in the past 6 months. If there's more than 6 months of inventor y their competing against then a larger price reduction is called for.

Hope this helps.
0 votes
Andrea Wince…, Agent, Milpitas, CA
Wed Jun 13, 2012
It is possible the home was overpriced from the start, but if the home is in an over $500k neighborhood, it may take more than 30 days to receive an offer. Before listing, their real estate agent should have shown them the neighborhood sold comparables. How is their current price compared to the other homes that have recently sold? And if they are considering a price reduction, how does the new price compare to that data as well?
0 votes
Bob Lasswell, Agent, Morgan Hill, CA
Wed Jun 13, 2012
Pricing at the right price to sell is an important part of good marketing. If all other aspects of marketing the property are being done such that the property is getting exposure to the market then the price needs to be reduced. Have the agent run a Competitive Market Analysis (CMA) to get a current estimate of sale price. Then run all the listing in the competitive neighborhood. A simple check is to look at the property priced right above and the one right below. The higher priced home should be better bigger and/or in better condition. The one less should be correspondingly slightly inferior. If not find the correct rank order in the competitive listing and narrow the price from there
0 votes
Norman Aless…, Agent, San Jose, CA
Wed Jun 13, 2012
Hi,
You have been given some good advice, let me add my thoughts here. If you have no offers then of course you are priced to high you need a correct CMA done and the price lowered to attract buyers. Is the Home easy to show? How about open houses are there any? Has it been shown on a Broker tour? I would lower the price and advertise it all over the net and hold the home open and make it easy for other agents to show it. Remember ANY home will sell if it is PRICED RIGHT.
Feel free to contact me with any questions.
At your service,
Allyson
408-705-6578
allyson@homesbyallyson.com
Certified Distressed Property Expert
0 votes
Thomas Bohlm…, Agent, Rolesville, NC
Wed Jun 13, 2012
No, reducing the price really means it was not priced right to begin with. SO the price adjustment was made.

Price is KING right now. the lowest price in the best move in condition SELLS.

I think Tuesday is the best day for adjustments. Why? any changes can take up to 72 hours for the IDX feeds though the MLS systems to take place. ie all the other internet RE sites will have fresh info for the Friday - Saturday internet searches.

Good Luck
0 votes
Elena Talis, Broker, Palo Alto, CA
Tue Jun 12, 2012
No, reducing the price is not always a red flag.

The real question is if your friend ready to sell. Is there a financial reason for your friend to stick with a particular price level?

If your friend is really motivated to sell at MARKET PRICE, he has to drop the price a bit below current comparables. DO NOT DROP IN $5K INCREMENTS. One large drop will always be better for the of sale. Drop the price it in time for the house to be on the broker tour on Wednesday and watch it sell.
0 votes
Dan Tabit, Agent, Issaquah, WA
Tue Jun 12, 2012
HomeOwner,
No, it's a sign of reasonable motivation and realistic expectations. I agree with Ron, if you don't get offers within a reasonable time something is off. If there are no showings, it may be more than price. If they are getting showings, but no offers, then it will likely be due to being overpriced.
If they are listed and the agent has the home exposed to the maximum number of buyers, has done a great job of marketing, your friends are doing their part in preparing the home for showings and leaving, then it's appropriate to reconsider the price. Not doing it is more of a red flag than reducing it.
0 votes
Arnold Layne, Home Owner, Morgan Hill, CA
Tue Jun 12, 2012
Remember your descriptions are subjective- are you sure GREAT applies? Newly remodeled great or 80's great? What is a great location? Schools, shopping, highway access, quiet neighborhood, etc- it depends on buyers. But you also answered your own question: the market has slowed down- therefore you should expect the sale to take longer. I believe the stock of desirable homes is a bit low now, so if you are correct about the great condition and great location, then you must be overpriced. If the seller needs to get a sale done, then drop the price at least 10%, hoping to get multiple offers. And despite what I read, a seller doesn't have to accept any offer, even for the asking price. Everything is negotiable and up in the air until the contract is signed.
0 votes
Staci Bell, Agent, Morgan Hill, CA
Tue Jun 12, 2012
Dear SJ home owner,

Couple of questions, is your friend using a Realtor or are they trying to sell on their own? As Realtors, we offer our experience, expertise of the current market, different neighborhoods and ways to market homes to get the best offer in the shortest amount of time. If your friend's house is in Morgan Hill or San Jose and not currently listed by a Realtor let them know using a professional is a great way to SELL!

Sincerely,
Staci Bell
Coldwell Banker
staci.bell@cbnorcal.com
408-427-1859
0 votes
Robert White…, Agent, Morgan Hill, CA
Tue Jun 12, 2012
So a couple of thoughts.

First, if the seller is satisfied that their agent has been marketing the property effectively, the most likely reason it is not selling is because of the price. Of course, your agent should be measuring this against things like how many times it has been shown. I know in my area, any agent that gets access to the keys gets logged by the lockbox and I can call them and get feedback.

In all honesty, if the agent has done at least that, there should be no question on why the property is not selling. Other agents will not be shy about pointing out that the folks they are showing the house too are saying it is overpriced.

Now if, after looking at everything that is going on, they do decide that the price is too high, they should not simply lower it and leave it at that. In most markets, buying activity tends to happen in price brackets. These brackets change from neighborhood to neighborhood, but with just a little research into the activity in the local market, you can easily pick out these brackets of activity. The home may currently be priced just outside one of these brackets, try to price it down into a more active bracket so you are being found by more buyers.

You should also make the price reduction an kind of event when you do it. On some systems I use I can create a promotion using the price reduction as a "hook" for that promotion. I will also usually contact all agents that have shown the property when a price change is made. If the agent has held open houses and had visitors sign in on a log, call or email those that left that information to let them know the price has been dropped. Also, do an open house on the weekend after the price drop.

Once the price is dropped, you are going to have the home show up for the first time for bunch of buyers with active searches running. Verify that the listing has the maximum number of photos, makes full use of the space for descriptions. Remember, the goal is to get folks online to go from sitting in front of their computer to selecting your property for a visit.

Also check your competition. What do other properties in your price range look like. Always try to get a buyers eye view when considering how to price your home.

Don't worry about how buyers see it. If the home is overpriced, it is overpriced. Some buyers may see that as an indication that the seller is willing to take deeper cuts from asking price, but cross that bridge in negotiation when the offers come in.

Good Luck,
Robert
0 votes
Ron Thomas, Agent, Fresno, CA
Tue Jun 12, 2012
LISTING PRICE
Understand that the LISTING PRICE has one primary objective, to attract attention: It is not intended to be set in stone, and in many cases it is not even a good guideline toward the SELLING PRICE.

Some Sellers believe that by setting the LISTING PRICE high, they can always come down, and people will make an offer anyway: WRONG! Buyers will just bypass the property and look at houses that are within their price range. And six months from now, the Seller will slowly start lowering the PRICE, (this is called “chasing the curve”) and Buyers will be asking the question; “What’s wrong with that house?” and “Why has it been on the Market so long?”

Other Sellers set the LISTING PRICE low, to attract multiple offers. (The correct strategy.) We are asked; “Aren’t you obligated to sell at this price if someone offers it?” The answer is probably not; for that to happen, you would first have to have only one offer, and secondly, the offer would have be exactly the same, down to the smallest detail, (please discuss this with your Realtor).
Another thought; Buyer will search for potential properties by groups; for example, $400,000 to $450,000, and $250,000 to $300,000. If your house is priced at $460,000 or $310,000, the Buyers will never see it. (something else to discuss with your Agent.)

Different Banks have different philosophies about pricing their properties: You cannot draw any conclusions without a good analysis.

Have your Realtor do a CMA, (Comparative Market Analysis) to help you determine your Offering Price. It is the surest way to determine the Market Value of the property.
0 votes
Terri Vellios, Agent, Campbell, CA
Tue Jun 12, 2012
They have an agent who should be advising them on this.

The advice I would give would be based on the condition of the home, the seller motivation, and the competition.

The rule I have if no offers in two weeks you will not get full price (depending on the point point). They may want to reposition the home and review the marketing. But their agent should be in the position to do this.

Have an amazing day.
Web Reference:  http://www.terrivellios.com
0 votes
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