4 minute read
The price is right – and rightly timed
By Erik J. Martin CTW Features
It’s been said that the best-laid plans of mice and men often go awry. And this can certainly be an applicable axiom for home sellers – many of whom insist on a high initial list price and stubbornly refuse to decrease that amount if the property hasn’t been claimed after a certain time.
The latter strategy should be avoided, the experts agree. That’s because if a home hasn’t sold within its introductory window, it’s likely not going to entice the right buyer unless the deal is sweetened in the form of a reduced price.
“An overpriced property becomes stagnant after a few weeks, and the market will begin to doubt the value of the property and wonder if there is an issue with its condition or location,” explains Tim Robertson, an associate broker with Newport Beach, California-based Compass/TriVista Real Estate Group. “When this happens, it’s almost guaranteed that the property will eventually sell for less than fair market value.”
And that can lead to significant seller’s remorse. But by strategizing carefully with your real estate agent ahead of time, you can avoid taking a major financial hit and know what to expect if and when a price cut is needed.
“I suggest setting a pricing calendar. Before even listing your property, establish your asking price as well as your bottom line price and agree to lower your price by a predetermined percentage every few days thereafter until it sold,” recommends Donato Callahan, owner of Stepping Stone Houses, a real estate investment company in Boise, Idaho. “This makes the process unemotional, logical, and predictable. The right time to lower a price is not when you get nervous – it’s when you and your agent have previously agreed to come down in price to ensure your goals are met.”
Greg Bond, president/ owner of The Property Manager Guys in Orlando, says the ideal time to lower the price on a home for sale is after completing a few crucial steps that don’t result in getting any offers on the table.
“You first have to check and compare other listings in your area to make sure you’re at a competitive price level,” he says. “Next, you need to review and improve the copywriting on your home’s listing or ad. You should have held multiple open houses that generate a low turnout rate. And you should offer an attractive commission or compensation to selling agents, which will incentivize them to schedule showings.”
Bond suggests considering several factors before lowering your price, including:
Your location and neighborhood – how desirable is the locale, and how easy is it to get around the area?
Competition – What is the average selling price of other houses in your area, and what are the features that your rivals are trying to promote?
A thorough review of your market listings – Have you posted a virtual tour or beautiful photos of your property? Is your copy attractive enough to entice potential buyers?
Market feedback – Have you considered what other people are saying about your house? Is it priced a little too high?
Days on the market.
Robertson’s benchmark criterion for a price reduction is if there have been 20 or more showings with no offer.
“If your home has been on the market more than four weeks without an offer, the property is likely overpriced and due for a discount,” he says.
Others suggest a more aggressive timetable.
“I recommend making a price reduction within the first 15 days if you’re not receiving enough views online and traffic at your home without offers,” says Jim Whatley, real estate broker for Uber Realty LLC in Fort Walton Beach, Florida.
The percentage you should lower your price by will depend on your location, comfort level, and agent’s advice.
“Historically, the first price adjustment usually ranges from 4% to 8% lower. This is what it often takes to re-energize the market and get its attention,” suggests Robertson.
Consider a second or subsequent price cut if your number of leads didn’t increase following the last price cut, recommends Bond.
“After analyzing online engagement plus the number of showings and inquiries, if you still feel you are achieving sufficient exposure but not generating offers, then it’s time to adjust the price yet again,” Robertson says.
The timing of a price decrease is not an exact science; you and your Realtor will need to think carefully about all the possible consequences before pulling a price cut trigger.
“If you lower the price too early, you might miss out on better offers. However, if you are too late, your property will sit on the market longer than you’d expect it to be,” notes Bond.
Remember: “A property is only worth what someone is willing to pay for. Often, that means finding the perfect buyer for your home, which requires cutting the price,” Callahan adds.
