Why? When? How Much?
WHY drop the price? Buyers aren't complaining
You've been on the market for a couple of months, had lots of showings but no offers. You're thinking that maybe it's time to drop the price. But you realize that nobody has complained that the price is too high.
Could there be another problem?
Nope. All the prospects that have viewed your home have said it... even if they never spoke the words. A decent number of showings and lack of serious interest means that your house does not compare as favorably with the others in that price range. Prospective buyers compare your home to others on the market and since they didn’t buy your house, they bought another. In other word, read between the lines when it’s not selling, unless you’ve got a dead cat behind the sofa.
Overpricing actually gives the advantage to the other homes on the market. Your house just isn't stacking up against the competition. Don’t wait so long in dropping the price that you make prospective buyers question why your home has been on the market so long.
WHEN to Lower the Price:
Consider seasonal factors, market conditions, pricing trends of competitive homes plus length of time on the market into consideration. Obviously consider your timeline needs and motivations.
During various times of the year you can put a house on the market and only expect to get two or three showings in 30 days, while during the hot selling season, you may have 15 to 20 showings.
If you haven’t received any buyer encouragement after a dozen showings (excluding most buyers who attend your open house), don’t procrastinate, get the price down unless you're willing to improve your home using the preparation and staging recommendations in the PREPARE phase.
An exception to this is if your home has appeal to a limited market. Is yours a three bedroom in a four-bedroom area? Is you're one of few homes without a basement? Not having a key item means you need to hang tough longer as your buyer just hasn't emerged (limited number of buyers) to see your home.
Slow periods that reduce the number of buyers makes it unnecessary to quickly drop your asking price - unless you’re in an urgent need to move. Slow periods are caused by bad weather, back-to-school focus, vacationing, the economy, consumer confidence, etc.
Believe it or not, the selling season really does begin to crystallize following the Super Bowl. Cabin fever begins to set in with prospective buyers by early March. The March and April period is an ideal time to put your home on the market.
If your home would appeal to an upper middle class buyer and above, plus you're in an area where corporate transferees are the norm, then selling in the dead of winter is quite common. The first of the year is when many corporations implement their new budgets, resulting in the relocation of management personnel.
HOW MUCH of a price Drop:
The price cut needs to be such that a new group of buyers will be attracted to it. You'll get the best effect from a price reduction when your new price appeals to a larger group of buyers. The lower the price, the more buyers there are.
For example, if you're considering reducing your home price from $188,500 to $183,500, the effect on increased showings will be next to nothing. A drop to $179,900, however, will get a lot more activity as you are now below another $10,000 threshold (180,000). You'll be appealing to buyers who won't look at anything higher than $180,000.
Suppose you’re sitting at $233,500 and sense it’s time to drop the price. A move to $229,900 moves you below a lower price point (230,000) and is just as effective as a $10,000 reduction (to 223,900) when it comes to getting more buyers in the door.
The purpose of a price drop is to make a home more financially appealing. But it also attracts more buyers. Make your home more appealing to buyers that are in a slightly lower price range.
Consider the overall pricing of the market your home is in. The difference between a $459,000 and a $469,000 house is extremely small (less than 2 1/2%), as is the difference between a $975,000 and a million dollar home. Higher price homes appreciate more in dollars and percentage than their lower valued counterparts. When they are faced with the need for a price decrease, high price homes require larger decreases to be effective. A five to 10 percent drop in the higher ranges will be noticed.
If a drop of $10,000 is warranted but meets resistance from the seller, smart agents simply go for a drop of $5,000. That’s because it’ll be easier to get the seller to reduce the price by a similar amount in the near future than it is to get the sellers to make the logical $10,000 drop in one fell swoop. But then the home will be even staler on the market and the agent’s hair will be a shade grayer.