Good Monday Morning!  

Yes, our local Real Estate market is changing. The market we are leaving was one of short times on the market, sales for above asking price and multiple offers. Today, we are continuing to see some of this hot market due to a low inventory of homes for sale, but change is in the air. In this market that is fast approaching, pricing homes with the market will be crucial. Also, listening to the market and adjusting the asking price of a home for sale if it is not selling will be important. The following article addresses something that we have not had to deal with in years, "price reductions".

Deciding to sell your home is just the first step of a challenging process. You have to get it looking its best, then find the perfect real estate agent and figure out how much to sell it for. But what happens if you didn’t price it right to begin with, or worse, the market shifts while you’re trying to sell your home?

In either case, you may have to lower the price of your home if you want to go through with your big move.

Does It Matter If Your Home is Priced Right?

According to Realtor.com data, 14.1% of homes listed in June 2023 ended up having price reductions, down from 14.7% in June 2022. Although both of these figures are well below historical norms seen before the pandemic, it’s still a lot of homes that aren’t hitting the mark on pricing.

It can be difficult to determine the right price for a home, but since you can lower the price at any point, or accept a lower offer if one appears, does it even matter if you get the price right to start out? 

It turns out that it does matter.

“A home receives the most interest within the first two weeks of its arrival onto the real estate market,” Toni Gambill, real estate agent and associate broker at LPT Realty in North Port, Florida, said in an email. “If it is priced much higher than surrounding comparable homes, it will dampen interest. A well-priced home will generally sell more quickly than one that languishes on the market and receives multiple price reductions.”

A home priced too high will not just sit, but it may also receive lower offers than similar homes that were priced right from the beginning. Sometimes buyers see price reductions as an opportunity to get a bargain.

The bids that come in for a reduced-price listing nearly always come in lower as a percentage of the asking price, as buyers will often attribute a greater amount of leverage and negotiability in those instances under the assumption the pricing was, and may even remain, too high,” says Ian Katz, a real estate broker with Compass in New York City, New York. 

What To Do Before Lowering Your Price

Since lowering your home’s price might end up hurting you if it was too high to start with, there are other things you can do to help your home sell if it hasn't generated enough interest. 

According to Katz, refreshing your listing is a great first step, since it costs almost nothing and can make a huge difference. “This may include doing some virtual staging, providing alternate floor plans, shooting a new video or 3D tour, or adding content that might increase traffic to the property.”

If you need more than better photographs, it could be time for more drastic measures.

“There are three main reasons why a home does not sell: price, condition and location,” says Gambill. “While location cannot be changed, it can be overcome by price and/or condition. Sometimes it makes more sense to change the condition of a home than to lower the price.

“Depending upon the situation, I might advise the seller to declutter, remove personal photographs, allow me to have the home staged, or to make an update, upgrade or repair that might be holding them back from receiving a competitive offer on their home,” says Gambill. “Sometimes curb appeal is needed and something as simple as adding colorful planters at the entrance, painting the front door a trending color, or adding updated outdoor lighting is enough to create consumer appeal.”

How to Find Your Home’s Ideal Price

Real estate agents often have to convince potential clients that their home won’t bring as much as they feel like it deserves — this isn’t because homeowners are unrealistic, but they often lack the experience and access to data to have a good idea what the market is truly like.

Real estate agents go by more than feel. They generally perform a comparative market analysis (CMA) before listing a home to get a solid idea of what the market is doing and is likely to do in the near future.

A comparative market analysis is a review and display of active, off-market, expired and sold properties over the past three to six months in a typical market. These properties are substantially similar if not exactly alike to the subject property in terms of size, condition, location and broader contextual market environment for the purpose of determining a suggested list price for a residential property, Katz explains.

Armed with this information, your real estate agent will attempt to help you price your home competitively. But sometimes potential clients are resistant to the news that their homes aren’t worth what they think they should be worth. These are the homes that generally end up requiring a price reduction.

“Some clients insist on a higher price point than I recommend and I honor that,” says Jamie Camp, a real estate agent at The Agency RE in Los Angeles, California. “I make sure to inform them that in two weeks if we do not have any movement on the home we need to sit down for another conversation about price. This creates an open conversation for the future.”

During those two weeks, Camp collects data from other real estate professionals regarding the listing’s value compared to homes currently on the market. Because the real estate market can change quickly, it’s good to have other opinions to support a price reduction.

“I like to ask other agents who have seen the home what their opinion is for the pricing,” says Camp. “By having my peers repeat what I felt at the start helps my sellers realize where we need to drop the price. I do not like making drastic price changes, just enough to show other agents and buyers that we are motivated and want offers to come in.

"In this market we are seeing changes week to week. One day a home will have multiple offersand sell $100K over asking and the next week a comparable home will not have any interest at the same starting price.”

There’s no set amount that you should reduce your listing to get a buyer, but it helps if you’re priced somewhere near other homes like your own, which is why market data is so helpful. The goal is just to get people who dig homes like yours in the door, after all.

“The reality is it only takes one buyer to see and fall in love with the property to make a transaction happen,” says Camp. “Having the home set at the right price to make the seller and buyer happy is essential.”

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