Pricing a home correctly is hard work. You want to get the most money for your house, but you also want it to sell. There is a fine line between too high and too low and it's not always an easy balance to find. This is why really successful Realtors are so sought after. They have a knack for pricing a home right from the get-go.
Whatever your current situation, you may be asking yourself if you need to consider lowering the price on your home. There are several really good reasons to do this. In order to get some insight into the reasons to reduce the price of a home we decided it would be a good idea to consult another real estate expert who has been in the trenches selling homes for quite a while. For this consultation we reached out to Bill Gassett, a top real estate agent in Framingham MA. Bill comes to use with twenty seven years experience and is regularly one of the top Realtors in Massachusetts for sales production. We think he knows a thing or two about pricing homes properly. So here is the advice that Bill has passed along about knowing when it is time to reduce your homes price.
Reasons to drop the price of a home
Few interested parties – This is a solid indicator that something is wrong with your listing, and it could very well be the price. If you or your Realtor are not hearing from interested parties pretty quickly after the house goes up this might be your problem. Generally, homes see the most interest in the first few weeks after they go up for sale. People want to get to these homes before they are snatched up by other buyers. If your home is not seeing this initial surge in traffic you may have priced it to high. All those potential buyers could be waiting out there, seeing if you asking price becomes more reasonable. The reason why the first few weeks that your home goes on the market will almost always be the busiest time is rather straightforward.
Simply put all the buyers in the market have seen the other homes available for sale already. When a new home hits the market Realtors will get in touch with their clients right away and schedule a showing. With the advent of the internet and all the listing syndication channels it is also likely that buyers will see the home immediately after it is listed for sale. This creates an initial burst of activity. This is why most Realtors will explain how imperative to price your home properly coming out of the gate. When you don't price correctly it can create damaging effects that are hard to overcome even if you choose to reduce at some point in the future.
You relied on Zillow estimates - Unfortunately sometimes homeowners will rely on one of the online home evaluation tools that give the estimated value of homes. What many sellers do not realize however is that these services are almost always grossly inaccurate. Buyers and seller will ask real estate agents all the time are Zillow prices accurate? The answer is absolutely not! In my experience the Zillow home value estimates are in most instances so far off it is incredible. In fact if you look real closely you will see in the fine print right on Zillow's site that they are off the mark by a large percentage in numerous locations around the country. Just ask any Realtor about the validity of a Zillow home value and you will get an earful of how bad it is. Real Estate agents are constantly explaining to their clients that their "Zestimates of value" are not to be trusted! If you are not aware of this and are selling a home for sale by owner you could make the mistake of thinking this data is trustworthy. This is why it is always a good idea to consult with a local real estate agent or at the very minimum an appraiser who can give you a realistic price.
You are running out of time – Not every seller has the time to wait around for a home to sell. There are plenty of situations where selling as soon as possible is for the best. If you find yourself in this place you may have to lower the price of your home to get it sold. This could be because you have to move suddenly for work or family, are going through a divorce or perhaps because you found exactly the new home you want and you cannot afford to pay two mortgages. At this point, it may be worth it to lower your price just to keep your life in order.
Your home is just sitting there – As stated before, most homes that are listed for sale see an initial surge in interest from buyers. Your home may or may not have followed this pattern. However, if the house is just sitting on the market for a month, two months or more – you really do have a problem. The best way to know if your situation is normal is to look at other comparable houses in your market at the moment – how long did they take to sell? If you are already 50% or more beyond that time frame, you may need to lower the price just to get it sold. One thing to keep in mind is that the "days on the market" for your home becomes critical. The longer a home lingers on the market the more likely you will end up getting low ball offers from a buyer. One of the questions that almost every buyer will ask their real estate agent is "how long has the home been on the market."
Buyers will ask this question for a number of reasons. First if the home has been on the market for a very long time and nobody has come along and bought the home they may think it is a lemon that nobody wants. Questions in their mind will start to crop up like "is the seller concealing an issue". In addition buyers will ask because if the home has been languishing on the market they feel like there will be more room for negotiating. A seller is always in the driver’s seat when their home is listed for sale but at some point in time the pendulum will swing in the buyers favor. You need to keep this in mind and adjust your price before that ever happens.
Lots of attention, no offers – The flip side to not having any lookers is having a ton of lookers – only no one is trying to buy. Your house may be really appealing in a lot of ways, but if the price is not right buyers will go elsewhere. You don't want your home on the market any longer than it has to be. If you are getting lots of interest buy no offers, consider lowering the price on your home. Sometimes you just need to hit the pricing sweet spot and you have been missing it.
Prices are changing – Selling a home can be a pretty frustrating experience at times. You have no control over the market and the market will sometimes turn against you. You may have listed your home at a reasonable price at the time, but a month later the market takes a noticeable turn for the worse. This means that the reasonable price your home is at is now not so reasonable. Other homes in your area may be going for less now, making yours look expensive. There is little you can do in this situation but lower your price to become competitive.
This scenario can happen when market values as a whole are dropping. In fact this was the case for a large portion of time with the real estate bust that took place from 2006 to 2012. You could price a home at X thinking it was competitively priced and a few months later reduce it only to find out that values really had dropped beyond your price reduction.
You can't fix it up – As much as you love your home, you can probably see where there are issues with it. If the pets tore up all the landscaping, the heating system is on its last leg, the kids marked up the walls or mother nature has taken a toll on the roof – all of these things buyers will notice. If you are not in a financial position to fix problems with your home, you really can't ask for a price that does not account for these deficiencies. You may have tried pricing it just below average, but this may not be enough. If you can't fix up a problem property you have to account for that when selling, and lower your price accordingly. Sometimes after you have procured a buyer a home sale problem will pop up that nobody realized existed. If you don't have the funds to tackle the problem you could be forced to either reduce the price or give the buyer a credit. Sometimes these things happen and you just have to deal with it. Many call this "Murphy's Law" of real estate sales.
Appraisal issues - Sometimes in real estate sales everything seems to be going as planned. The agent has put the sign out on the lawn, advertised your home well and then quickly has received an offer from a buyer that is absolutely in love with your home. The only problem is the lender doesn't see eye to eye with what you, the buyer and the Realtors think the value of your home happens to be. Nothing can kill a deal quicker than an appraisal issue on a home. Learning how to deal with a home appraisal issue is critical. It can mean the difference of your home sale staying together or not. A good real estate agent who has been through appraisal difficulties should be able to guide you but if not use the reference I have provided. As you can see there are quite a few valid reasons why you may want to reduce your home price.