How to Know When It’s Time to Lower Your Listing Price
Within the last 12-18 months, the national real estate market has experienced historic, nearly unprecedented trends. Home buyers have foregone inspections and appraisals. Sellers have gotten multiple offers even before a multiple listing service (MLS) link goes live. They have offered over asking price, putting large sums of cash to cover a sale beyond what a mortgage company would lend them. Many buyers have been in such competitive races to win a seller’s approval and choice that they have even taken to writing heartfelt letters begging to stand out.
It has been wild out there. With high, high demand and low, low inventory the housing market has been quite hot.
However, with ongoing national economic ebbs and flows, inflation, and now, climbing interest rates, some areas are seeing a cooling of the market and home prices coming back into more realistic parameters. As expected, these changes are often causing some homes to stay on the real estate market longer.
If you are currently selling your home, or hope to do so in the near future, here is what you need to know about lowering your listing price. (Buyers, stay tuned until the end to see how these tactics might impact you as well!)
One of the biggest advantages of using a professional, licensed real estate agent to sell your home is the fact that they know how to effectively price your home to begin with. Using timely market data and their depth of experience, they typically can get within a pretty close range of what your home should and will sell for. However, real estate agents are not omniscient and don’t know everything.
According to Zillow, over 12% of home sellers end up reducing their price at least once. That said, there are three telltale signs that your home price might be off.
Sometimes before you even list the home it is wise to get a seller-paid appraisal to get a realistic idea of your home’s true value. Perhaps your home isn’t selling because it isn’t actually worth what you think it’s worth. Keep in mind, your love of your home and all of the things that make it special to you might not translate into dollars on an offer. Getting close to the appraisal amount with your asking price will also aid any potential buyers when it comes time to make sure their mortgage loan is approved.
Showings and Timing
There is an unwritten rule that says the first two weeks your home is on the market will tell you all you need to know about the listing price. Most real estate professionals will tell you that the foot traffic, or in-person, or virtual showings of the home within the first 10-14 days will be a true indicator of how accurately you have chosen a listing price. Which leads to…
Offers and Timing
Similarly, there is usually a correlation between foot traffic and the number of offers potential buyers are making on the home. If people are seeing the home but not submitting formal offers, the price is often the problem. There may be a better value down the street. This is why once a home is listed, if the showings and offers aren’t rolling in, it is likely that the home listing price is too high.
The Two-Week Rule
It is widely accepted that acting quickly is key. Most real estate professionals use the two-week rule. If, within the first two weeks there are few showings and few or no offers, it is wise to consider reducing the listing price of the home. Homelight suggests, “The likelihood of reducing the list price increases the longer a house sits on the market. So if you have reason to believe you’ve overpriced your home, a swift price correction is better than waiting additional weeks. Statistically, the longer your house sits on the market, the lower the price you’ll fetch.”
Lower Once, Sell Fast
Ideally, if you end up needing to lower your listing price, experts agree that in order to generate interest and activity in your home the best strategy is to make your price drop at a one time only event. Lower it enough to stir interest, get traction, increase showings, and therefore increase offers and an eventual successful sale of the home. Buyers tend to look at days on market when shopping. Homes that have been listed for longer than usual listing times tend to be a red flag.
While seeing a price reduction could signal to your brain that you are getting a bargain, be aware that this isn’t always the case. Many reduced-price homes may offer some savings, but be sure to do your research with your own buyer’s agent. Having an expert help you uncover if a contract fell through (and why), what about the area (crime rate, schools, foreclosures) may be impacting a stalled sale or any reasons to dig more deeply into a home inspection.
Whether you are a seller inclined to get your home sold or a buyer thinking that you may be getting a good deal, one final piece of advice for either party is to remove emotion from the equation and rely on both hard facts, data, and a real estate professional’s expertise.