A fisherman who’s waited too long for his first nibble must decide whether to cut bait or patiently keep his line in the water. And the same goes for sellers who experience little to no interest in their home for sale: Cutting the asking price at the right time may reel in a buyer faster.
Price reductions on existing homes for sale are certainly in vogue. Approximately 25 percent of American home sellers had decreased the asking price on their residence in July, based on data released by Trulia.com, with the average discount being 10 percent off the listing price. Among the 50 biggest U.S. cities, half had price cuts of at least 30 percent.
If you’ve listed your home on the market but have had no offers or significant traffic after a certain amount of time, common sense says that it’s time to consider a price cut. The proper timing of this move can be crucial.
“Although this is very market-specific, if a seller doesn’t receive an offer within 60 to 90 days, they need to seriously reconsider their asking price. Buyers looking in a specific area will look at every house available. Once they see everything and nothing appeals to them, they wait for more inventory to hit the market,” says Eric Luneborg of CAL Ventures, a property management firm in Dallas.
Barry Salottolo, a licensed real estate broker and managing director, BP Vance Real Estate in New York, suggests an even more aggressive strategy: a price reduction of at least 5 percent after two weeks to prevent the listing from becoming stale if, up to that point, the visibility on the property has been active with inquiries and showings.
The activity curve for a new listing typically shows that the most activity takes place during the first two weeks a property is on the market. If, during those two weeks it does not have any showings or doesn’t receive a purchase offer, the price may be too high. Thirty days after first being listed, foot traffic tends to fall off because anyone who can afford your home has probably already checked it out.
“Thirty days after the first cut, a second cut would be in order, providing the same basic scenario as present – high traffic and interest but no offers,” says Salottolo.
If there have been very few sales, but there is a large inventory of properties on the market, buyers may be turned off by location; hence, the market value of your home should reflect that. Evaluating how long it takes to sell a home in a particular neighborhood will help an agent know when to lower the price.
“For example, if the average time to sell is 100 days, and the property has been on the market for 40 to 50 days and has had very little activity, then it may be time to lower the price,” says Jon Gordon associate broker and sales manager at Prudential Snyder & Co. Realtors in Ann Arbor, Mich. “A new analysis of recent sales, if any, since the home was first listed will provide guidance on how much to lower the price.”
While price reductions are common in such a strong buyer’s market, try to avoid slashing your price too many times, which can send the wrong signal that there is something wrong with your property or that you’re too desperate as a seller. Instead, work closely with your agent with the goal of discounting the price no more than once, if possible. If the new price is low enough, there’s always the chance that buyers will compete and bid the price higher.
If you haven’t listed your home yet, your best bet for a faster sale is to price it realistically right from the start. The primary reason why homes languish on the MLS is that they are overpriced.
“The strategy of listing the property with an artificially high price and then dropping it a few thousand dollars every few weeks is a waste of important selling time,” Gordon says.
