How you do a price reduction in a Seller’s Market

Okay, so you have made a mistake and overpriced your house. No worries. The market is strong enough that you haven’t shot yourself in the foot, you’ve just wasted a little time.

Back when the market was bad, it was even more critical to get the price right from the get go. The reason was because there were so few buyers entering the market. If they came to see your house and didn’t like it, a small price reduction wasn’t much motivation to come back and see it. About all you could do was made a big price reduction or wait for new buyers to emerge into the market.

Today, there are new buyers out every day. I don’t think in this environment that you need a huge price reduction to get your house sold. While it is true a lot of the same buyers who saw your house probably haven’t bought anything because there is literally nothing else to buy, your best bet is to catch a buyer who just started looking.

I think right now, I would suggest a small price reduction. That could serve two purposes. The first is that it might just cause a buyer who is tired of losing out in multiple offers to come back to you. It also makes it attractive to those brand new buyers. Every buyer loves a price reduction.

If your house makes it past the first day on the market and you didn’t get an offer, something is wrong. Whatever the issue is, a lower price always helps. If you reduce the price a bit and it still doesn’t sell, keep reducing the price a little until it does.

Of course, the best way to prevent needing to drop your price is to start out with the right list price from the beginning. Pricing it correctly usually means a faster sale and a far greater likelihood of getting multiples offers.

Want to know where the market is, TODAY?

I like to do these market updates every once in a while. When I do, I do them in real time. What do I mean by that? I meant that the info is right now. Most of the time when you are hearing about the real estate market, it is from sources that are a month or more behind, or it is from a national source that is giving you a dated snapshot of the market for the entire country. My data is taken from the MLS in the past 20 minutes and is specifically for the Bluegrass area.

I won’t geek out and break down all this data into price range, which town, or property type, but there were 24 existing home sales that went pending in the past 24 hours. Do you want to guess how many of them sold within 2 days of being listed? You would think it would be all of them based on what your realtor friends post online, or what you read in the news. But, of those 24 houses, only 4 of them sold in less than 2 days. There were 8 that sold between 2 and 10 days. 4 sold between 11 and 30 days. 4 sold between 31 and 60 days. And 4 sold between 61 and 90 days on the market.

Let’s look at the houses that closed in the past 24 hours. While pending sales give us a snapshot of what the market is doing right now, freshly closed sales give us a snapshot of where the market was a month ago since it usually takes 30 days or so to close.

How many of the closed sales do you think got full price, or over full price offers when these sales went pending last month? Again, you would assume all of them, right? Of the 23 closed sales posted today, only 8 of them sold for the full list price. 5 sold for over the asking price. One sold for $10k over the list price in a neighborhood where I have seen this happen frequently. That means 10 of the closed sales went for LESS than the full asking price.

I could go a lot of ways with this blog post, but I think I will take this chance to say that you really need an agent that knows when you need to offer the full price, when you need to go over the list price, and when you can make an offer for less than the list price. The market is so fast right now that I think a lot of buyer’s realtors are not looking at comparable sales in the neighborhood. They are just so focused on getting an offer in fast that they don’t really take the time to figure out what the house is really worth. To me, that is the most important bit of info we have to offer a client. I have had many listings in the past year where I had a ton of showings and didn’t get an offer on the first day on the market. Then the next day a realtor is frantically trying to reach me saying they are about to send a full price offer and are so glad the house is still available. Well, if I had 12 buyers look at the listing and didn’t get an offer, truth be told the house probably wasn’t worth the list price……but I am not going to tell the buyer’s realtor that, I just tell them where to send the offer.

That’s the data. I am by no means saying the market is slowing down. It is after all the middle of winter which is usually the slowest time of the year. I do think the market will stay strong for quite some time. I just wanted you all to know that not every house sells the first day on the market for full price or more. I want to help separate the perception of what the market is like compared to the reality.