Has your house been sitting on the market for a while? Have you gotten any offers? You just don’t understand it: it’s a seller’s market, and maybe you chose the best time of year to sell, but still you have no offers. Perhaps the issue, then, is your asking price.
When is it time to consider a price reduction? And by how much should you lower your price?
4 Signs You Should Lower Your Asking Price
How long has it been on the market?
A house that’s set at the right price from the start will get offers within the first few weeks. If it’s been 5 weeks or more since you listed, it may be time to lower the price, or even delist it.
Delisting your house gives you a chance to make improvements and relist later, so the listing is “fresh” again.
Listen to Buyers
Have you had multiple showings but received no offers? This is an obvious red flag that something’s wrong.
Do not be afraid to ask buyers and their realtors for feedback. If the majority say, “It’s too expensive,” or “Out of our budget,” or the like, then it’s time to drop the price.
Know Your Market
We’ve been in the midst of a seller’s market for some time now. A lot of buyers are shopping the market, but inventory is low. Most times, this means properties sell faster, but the market does not guarantee a sale if the price is too high.
Search comparable properties in your area to answer the following:
- Are they selling fast or lingering?
- If they sold, how much did they sell for?
- What is the average time a house sits on the market (in your neighborhood)?
- How many houses (in your area) had a price reduction?
- How long did it take houses to sell after a price cut?
If you’re past the sell-by-date for your area, it may be time to cut the price or delist for a while.
Your Property Appraised Low
Buyers who take out a mortgage are required to appraise a property to confirm its value. If the house appraises too high or too low compared to the selling price, the lender may refuse to loan them the money.
Sellers should get an appraisal of their property to find out its true value and decide its asking price.
By How Much Should You Cut the Price?
Choosing when to reduce the price and by how much is never easy. The timing is important, and the price reduction must be worded just right so as not to raise buyer suspicion.
If the price is too low, buyers will think there’s something wrong with the property, and you may lose thousands of dollars. If it’s still too high, buyers will continue to avoid it to save their time and budget.
Most times, the average price cut is 2.9% of the list price. Your best ally, though, in changing the price is your real estate agent. They can tell you if the price is too high or unrealistic, and they should have an understanding of market trends to properly evaluate your property.
4-Point Price Reduction Strategy
- Act Fast: if the number of showings versus offers in the first few weeks is not good, don’t wait to reduce the price. Otherwise, you may have to delist.
- Be Realistic: sometimes a price adjustment, even one that’s slightly lower, is worthwhile, compared to accumulated mortgage payments and utility costs over the time of the listing. Ask yourself: what’s the lowest you can go but still make a profit?
- What are Other Sellers Doing: again, look at comparable properties, with or without price cuts, and how long it took them to sell.
- Reduce the Price ONLY Once: multiple small reductions go unnoticed by buyers. Make a single significant cut to jump-start interest in your property.
Sell for a Price Cut Out in Cash
Rather than speculate markets, buyers, and prices, consider selling to a real estate investor for a cash offer. Most investors pay cash for a property “as-is”, without warranties, inspections, or repairs. They cover all closing costs and additional sale fees, but you pick the closing date, which can be in several months, 30 days or less.
Most investors pay 70% of the market value AFTER repair value. But if the property is in good shape and in a good location, they’ll pay the market price or 2% to 3% less, which is still more than most sellers get with a traditional sale, since their agent takes a 3% to 6% commission.