10 Questions to Ask Before Dropping Your Price
So you’ve hired a Realtor, set a price and listed your home. The only problem is no one’s biting. The reason? Either you’ve priced your home too high (read: it’s too expensive and doesn’t come close to market value) or you’ve done a poor job marketing the listing. If it’s the former, you may need to consider dropping a home’s listing price.
Unfortunately, pricing a home incorrectly has lasting consequences. When a home is initially priced too high, it’s less likely to receive a desirable offer – or any offer for that matter. As time goes by, and the home continues to sit on the market without offers, buyers will likely assume that something must be wrong with the home. After all, if it was so great, then surely it would have sold by now. In general, the longer a home sits on the market, the harder it is to sell for the original asking price.
To prevent your home from growing stale (read: sitting on the market for multiple months), it may be necessary to reduce the price. While a price reduction certainly isn’t ideal, it can be absolutely necessary to sell a home. However, before dropping a home’s listing price, we recommend asking yourself these 10 questions (below) first. Once you answer these questions and consider alternatives, you will have a clear-cut answer on whether or not to reduce the price of the home.
10 questions to ask yourself before dropping a home’s listing price
How long has your home been on the market?
First and foremost, calculate the number of days your home has been on the market. The more days on the market, the more necessary it may be to reduce the price. If your home has been on the market for a full month, and you’ve barely had any showings (much less offers), it’s probably time to consider a price reduction. If, after three months, you still haven’t received an offer close to the listing price, you should seriously consider reducing the price.
Have you marketed your home efficiently?
Have the sellers done all they can to market the home? Perhaps the home isn’t selling because the photos in the MLS listing are poor quality. Or maybe buyers are having a difficult time seeing the potential because the home is overstuffed with decor and belongings. In this case, the seller needs to de-clutter the home to make it more sellable. To market a home successfully, your Realtor should also host showings and open houses. They should make sure the home is listed on various real estate websites (not just MLS) to advertise the property to potential buyers.
Have you had numerous showings and open houses without any offers?
After several well-advertised open houses and numerous showings, your home has come up empty without any offers. If the home draws scores of people yet zero offers close to the listing price, it’s most likely priced too high. While buyers may be initially intrigued by your home, they will likely look for better value elsewhere, which is why it’s important to price a home near its actual market value.
Are you being told by others that the home is listed too high?
Are you getting feedback from friends, neighbors, Realtors and buyers that the home is priced too high? If the house has been on the market for numerous days without any offers, then it may be time to listen to the chatter. In addition, if your own Realtor tells you that the home is listed too high, listen to their advice. After all, they’re pros who know the market better than anyone.
Have you swapped out the photos for better ones?
So you’ve listed the home, and it’s been sitting on the market for numerous months. If you’re convinced that the price isn’t the problem, take a look at your home’s listing photos and description. It may be time to change them up. Swapping out old photos for new ones and tweaking the description can go a long way in making your property look like a brand new listing. Hopefully, it will make buyers take a second look at your home.
Is there currently an abundance of inventory?
Are there six homes for sale on your street already? Is the neighborhood inundated with inventory? What about the local housing market as a whole? If there are more homes for sale (read: supply) than buyers (read: demand), this is considered a buyer’s market. In a buyer’s market, home prices are typically lower to reflect the lack of demand. If you’re looking to sell your home quickly in a buyer’s market, you may need to lower the price to a more realistic number.
Did the home appraise for close to the asking price?
Did a contract fall through with a buyer simply because the home didn’t appraise? If the appraised value was far less than your listing price, you should consider lowering the price. Buyers who are purchasing a home with a mortgage may not be able to make up the difference in cash between the appraised value (which determines how much a bank is willing to lend the buyer) and the agreed upon price. If this is the case, it may not be possible to sell a home for the asking price.
How slow is the local housing market at the moment?
Is your local housing market described as “hot” by Realtors? Are buyers scooping up real estate left and right? Are homes selling like hot cakes? If the answer is yes to these questions, then your local housing market is not a slow-moving market. In this case, you may want to consider sticking with your listing price. However, if the market is slowing down, consider lowering the price.
Are the comps in your neighborhood priced below your listing?
Take a look around. Are the “For Sale” homes in your neighborhood listed way below your listing? Are these homes comparable in square footage, features and location? If comps in your area are priced well below your home on a square footage basis, you should consider reducing the price of your home. Otherwise, buyers will likely purchase the cheaper (yet comparable) home in your neighborhood over your property.
Have you already lowered your price?
Have you lowered the price once or twice already? If the answer is yes, you may be in trouble. The more often a home’s listing price is lowered, the more likely buyers will assume something is wrong with the home. Many experts recommend only reducing a home’s price once, which makes the initial listing price extremely important. If you haven’t lowered the price of your home, consider doing so after a month or longer of no offers. Make sure the price reduction is significant enough to draw potential buyers.
Bottom line: if a home is priced right, it will sell. If it’s priced wrong, it will likely sit on the market for a very long time – possibly forever.