When selling your home when should you lower the price?

Asked by Liz, Philadelphia, PA Mon Aug 8, 2011

My house has been on the market for 5 months at the same price, so far only 3 people have looked at the house.

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17
Alan May’s answer
Alan May, Agent, Evanston, IL
Mon Aug 8, 2011
If your home has been on the market for five months, with only 3 showings, that's a strong indication that you're overpriced. People are viewing your home on the MLS, and the internet sites, and are making a decision NOT to view your home in person... based on your photos, room count and your pricing.

I wouldn't go so far as to reduce by 10% every month... but clearly your price is too high. How did you arrive at your pricing... did you use local comparable sales and current listing? I you're listed by a Realtor, you might want to ask him/her to reevaluate their CMA and see if you're still competitive.

Today's market is just too difficult to be priced too high. People will stay away in droves unless your price is correct, and buyers today are incredibly savvy, and they know a value when they see it.

Good luck.
2 votes
Ron Thomas, Agent, Fresno, CA
Wed Aug 10, 2011
You should NEVER lower the LISTING PRICE;
Actually, that should read; YOU SHOULD NEVER HAVE TO LOWER THE 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.)

We have found that extremely often, the LISTING PRICE that is set on SHORTSALES and REO’s are not determined, nor even discussed with the Bank: The banks play their cards very close to the vest, they will not tell the Listing Agents any more than they have to; they will not give us their lower limits. So usually, the LISTING PRICE on a distressed property is a number taken out of the air.

If you are considering a property, have a Realtor do a CMA, (Comparative Market Analysis) to help you determine your Offering Price. If you look at enough CMA’s, you will see the trends.
1 vote
Jeff K, Home Buyer, Bristol, PA
Wed Aug 10, 2011
Liz,

I agree that you are priced too high. Otherwise you would have had more showings. Your agent may or may not be telling you this - we don't know since you didn't provide more info.

You need to know the recent SOLD COMPS (SETTLED) for your house. Your agent can run these for you in no time flat. This is what your home is worth - now. Pretty much. If that number is one that you can accept, one way or the other, and you want out of that house - then lower your price to say $10K-25K or so above those SOLD COMPS.

BUT ... your price also should NOT exceed the standard $50K price bands that people use to find homes (250-300K, 300-350k, 350-400k, etc). If you aren't priced right, people won't even look at your home. It's a buyers market and this will remain a fact for a long time!
1 vote
Kristoffer L…, Agent, Philadelphia, PA
Mon Apr 2, 2012
Hi Liz,

General rule of thumb is that the first 4-6 weeks in the marketplace are the most important weeks to sell a home at the highest price it could have attained. If your home is listed with a realtor, they should have suggested up front to address the price after 3-4 weeks on the market. Another good indicator is if you haven't had a showing in two weeks, reduce the price or if you've had 8-10 showings in short timeframe and no offers, you're overpriced. It really all depends on where you started with your list price too with regards to the comparables. Sellers tend to think they have the best home in the neighborhood, but regardless of whether they do or don't, the likelihood of the property appraising at the price you have it listed for, without supporting comparables is very slim. Again, this should have been discussed up front so you had a fundamental understanding of the market. I don't subscribe to the list $10-20k above comps theory, as you're just adding days on the market and making the listing stale. The homebuyer today is extremely savvy and between most agents saying a home is overpriced to 'sound' knowledgeable and the information they have at their fingertips, if they feel its overpriced online, they won't even go to look at it. Hope that helps. Best of luck!

Kristoffer Lehman, ABR
Keller Williams Real Estate
Licensed in PA - #RS299648
Office # 215-646-2900
Cell # 267-254-4755
Fax: 800-686-7534 or 267-419-2974
Email: klehman@kw.com
Web: http://www.KrisLehmanHomes.com
FOCUS + INTENSITY = RESULTS
Referrals are the heart of my business.

A personal referral is the best compliment you can give me. Have friends or family outside PA? I can find them a great agent. Thank you!
0 votes
Bob Kelley, Agent, Blue Bell, PA
Thu Aug 11, 2011
Liz,

I would definitely start with going to visit your competition. Schedule a showing for other homes in your area and try to look how those homes compare to yours. You'll want to look at these houses through the eyes of a buyer. For my sellers, I always think this is a great place to start. It let's you know exactly what you are competing against and the more information you can gather the better off you will be.

Without knowing all of the details of your situation it's hard to give specific advice. The listing price should drive traffic to your property not deter it. The theory is if you price your house for $50,000,000 no one will look at it. On the other hand, if you price it at $100 buyers would be beating down the door until a bidding war drove the price to the appropriate market levels. Both are hypothetical extremes but the point remains the same whether you are severely overpriced or just a little overpriced you miss out on potential buyers. You list that you are both a buyer and seller. Some other factors to consider would be if you have to sell your current property in order to purchase a new one or if you have found your dream house to purchase sometimes you are willing to take a little less on your current home.

I hope some of this helps. If you want to contact me directly feel free.

Best of luck,
Bob Kelley
215-393-1139
Century 21 Alliance
0 votes
Benjamin R.…, Agent, Philadelphia, PA
Wed Aug 10, 2011
Liz,

Most likely the listing price is too high. However, everyone has a unique situation so it is hard to say without more information.

Ask your Agent for an updated list of the comparable properties in the area. You live or lived in the neighborhood where your house is- make sure your agent is using relevant data. Prices may change block to block in Philly and certainly neighborhood to neighborhood. Get a list of the homes that are for sale in your neighborhood and make sure you are competing well against them. You don't have to beat out every home in Philly, just the ones in your neighborhood.

Good luck!

Ben
0 votes
Alan May, Agent, Evanston, IL
Mon Aug 8, 2011
Yes, your strategy might work, but it's blindly reducing the price a pre-determined amount, regardless of the activity in the marketplace.

Not all sellers are upside down, nor in danger of being foreclosed. A recent national survey showed that 40% of American homeowners have no mortgage. So they're in no danger of being foreclosed.

The average national mortgage is $138,000, and the average home value in that survey was $283,000... so they're not upside down, nor in danger of being foreclosed.

A patient seller might actually reap results, and a smart seller, with a smart Realtor could sell at whatever the days' market value is. Some of those sellers may have to bring money to the table in order to close. But some won't.

I just don't subscribe to your "accelerating-economic-global-debt-collapse " philosophy, sorry. While the market, at least in our area, is definitely slower, homes are still selling, and buyers are still buying
0 votes
Dan, Home Buyer, Alabama
Mon Aug 8, 2011
Sorry, I just don't agree with your assessment."

My strategy would result in a home sale. Looking around it is quite clear that most disagree with my assessment.

A patient seller will see their home foreclosed as we also see plenty of.
0 votes
Alan May, Agent, Evanston, IL
Mon Aug 8, 2011
Sorry, I just don't agree with your assessment.
0 votes
Dan, Home Buyer, Alabama
Mon Aug 8, 2011
Reducing 10%/month means that the seller is serious and has come to grips with reality. At some point during the accelerating economic global debt collapse there will not be a buyer anywhere near today's asking price.

Waiting for that sucker to come and overpay worked fabulously for a time but not anymore.

Sellers need to get the heck out of realty before the banks dump that humongous shadow inventory and the economy goes straight to 3rd world status where it arguably belongs.

Buyers are truly doing sellers a favor in purchasing a home today.
0 votes
Anthony Tull…, Agent, Carson, CA
Mon Aug 8, 2011
Five months with only 3 viewings is a clear implication that the home is over priced. As opposed to waiting on that mythical buyer that will see the same value as you do, I would recommend you lower the price of the home to garner attention. WHen the offers start coming in, if your agent is any good he will begin a bidding war between the interested parties. Hope this helps.
0 votes
Alan May, Agent, Evanston, IL
Mon Aug 8, 2011
Because a knee-jerk, Filene's basement type sale isn't the answer to real estate sales. Pricing it correctly at the beginning (or even slightly below market value) is better.

Setting yourself up so that you randomly drop 10% each month is a desperate measure, and not every seller is desperate to sell. In our region, the average home sell for approximately $500,000. A 10% drop each month would be:

$500,000 1st month.
$450,000 2nd month
$405,000 3rd month.
$364,500 4th month.

and while reducing to $450,000 the first month... that sounds great on paper.... but what you really need to do is analyze the market... see if there are any comparable homes that have sold in the past 30 days in the $450,000 - $500,000 range at all. If zero homes have sold, then the price may not be the issue. If three homes have sold that were true comps... then consumers chose those homes over you... you're due for a reduction... and possibly... $450,000 might not be a low enough reduction.

A knee-jerk 10% is not a good option, in my opinion. You need to know what's selling and get in front of the market. Now, not all sellers are willing to do that, and not all agents are analytical enough to understand it. Your 10%/month plan might work, but you might be leaving money on the table, OR not reducing quickly enough.
0 votes
Stephanie Le…, Agent, Miami Lakes, FL
Mon Aug 8, 2011
Hi Liz,

Did you listed the home for sale with a Realtor and if so did he/she give you a CMA to price the home..

If the home has had only 3 showings. Then ask your realtor to provide you a list of the closed sales and pending sales. This will give you an idea of what price range the buyers are active...

Good Luck...
Web Reference:  http://www.SLeonRealtor.com
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Aug 8, 2011
Review comps with your agent, recently sold similar properties in the immediate area, see what the data suggests and adjust accordingly, be as competitive as possible; keep reviewing new comp data on a regular basis and keep adjusting as necessary; also review marketing, does it maximize your exposure; keep in mind that a home is worth what someone is willing to pay for it; it doesn’t matter what the seller needs or potential buyers can afford to spend; market conditions do matter as does the immediacy for a transaction to take place. In setting a price, it is in the seller’s best interest to focus on the current market conditions...
0 votes
Ron Thomas, Agent, Fresno, CA
Mon Aug 8, 2011
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.)

We have found that extremely often, the LISTING PRICE that is set on SHORTSALES and REO’s are not determined, nor even discussed with the Bank: The banks play their cards very close to the vest, they will not tell the Listing Agents any more than they have to; they will not give us their lower limits. So usually, the LISTING PRICE on a distressed property is a number taken out of the air.

If you are considering a property, have a Realtor do a CMA, (Comparative Market Analysis) to help you determine your Offering Price. If you look at enough CMA’s, you will see the trends.
0 votes
Dan, Home Buyer, Alabama
Mon Aug 8, 2011
I wouldn't go so far as to reduce by 10% every month"

Why not?
0 votes
Dan, Home Buyer, Alabama
Mon Aug 8, 2011
Sellers never take this advice:

Every month your home does not sell, reduce the price by 10%.

If you are unable to come to grips with this reality then consider defaulting.
0 votes
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