Use to be my thought on price reductions was to drop the price enough to attract a new pool of buyers to the house. I use to tell my clients that what we want to do is lower it 2-3% at a time so that we’d lower the price to the high range of the buyers who were looking at cheaper houses. Always worked. Always made sense. Now, about the only time I suggest a big price drop is if I did something like list it for what the seller wanted and wait for them to realize it was too high. Some sellers are funny. You can’t tell them what their house is worth…they just have to find out for themselves, and that is how you have to do it.
Why the change? The market. It is improving. In a flat market, it is sooooo easy to figure out the right price. When I got into real estate, prices were going up. Before you’d list a house, you’d look at the comps and ADD 2-3%. Then as the market declined, you’d look at the comps and list for just a bit less to stay ahead of the flatulence from the busted bubble.
So, now I’m taking the approach that I want to reduce it slowly, but regularly. The forces of supply and demand might just make the market value vary like fresh seafood at Red Lobster. I’ve seen some houses sell for far more than I thought they were worth just because there are more buyers for a particular property than there are houses available. Case in point is a house in The Home Place. It sold brand spanking new in 2009 for $176k. It just closed last week for $180k. Almost nobody is getting more for their house than they paid for it, yet alone a house that was brand new 3 years ago. Another one in Andover Hills sold a few years ago for $205.5k. It had been on the market for a long time. Then, the folks that bought it just sold it for $219k. I had been it in before they bought it. Other than their furniture and paint, it was the same house. I even checked the disclosure to see if they had done anything like put on a new roof or new HVAC. Nope, still original. See, more buyers for houses in Andover brought the price up!
This plan is nothing new really, banks have been doing it with their foreclosures for a while now. For the banks, it is a way of getting top dollar for their properties. They start high, reduce it every 2-4 weeks by the same amount until they have offers. Other agents have used small price reductions to make their listing reappear in saved searches and land on the home page of LBAR when realtors log in. It is a cheap way of buying exposure. They don’t do that as much now because they can just delete the listing and make it pop back up on the MLS as a “New Listing.” See, back several years ago, agents didn’t have easy access to deleting the listings and LBAR charged cash money to do it for you….but the agent could do a tiny price reduction pretty easily and for free!
Okay, I can hear you thinking “Won’t buyers and their realtors notice the price reductions happen on a regular basis and just wait until I practically give my house away?” From what I have seen, the answer is no. It is kind of like a reverse auction really. Even if they notice the price going down systematically by small amounts, they’ll also be afraid that somebody else might beat them to it before the next price reduction. It can create a sense of urgency.