Is It Time to Slash Your House Price? Reductions Aren't as Bad as You Think - and Could Even Spur a Bidding War
Home sellers today might find themselves encountering a sharp and painful divide between their hopes and reality. The hope, of course, is that their house will quickly fetch multiple offers way over the asking price. The reality? Their property might sit for a while, perhaps with no offers at all.
At that point, sellers might have to contemplate what not long ago was unthinkable: slashing the asking price of their home.
While price reductions might have been a rarity during the red-hot seller's market of the past couple of years, they're becoming increasingly common today. Realtor.com listing data shows that the share of homes that reduced their list price reached 14.9% in June versus 7.6% a year earlier.
Why have price cuts on listings nearly doubled? Because many home sellers have yet to adjust their lofty expectations against the harsh new reality that has rapidly taken over the ral estate market today. Mortgage rates are up, curbing homebuyers' borrowing power. The number of listings on the market is up, too, by 18.7% in June compared with last year.
Meanwhile, home prices have alrady started falling in some parts of the country, all of which adds up to the fact that those legendary days of $100,000-over-asking bidding wars that sellers might fantasize about may largely be over. And, if your home's current price doesn't relfect these new conditions, it might just sit there until you do something about it - like slash the price.
Truth is, a price reduction could even bring on that bidding way that could drive a home's price higher than before. But there's an art to pulling this off. To help, here's a guide to pulling off a successful price reduction today. We'll break down how to know when it's time, and how exactly to go about trimming your listing price without sending the death knell to buyers.
How to tell if it's time to reduce the price of your home
If you're asking yourself whether you need to lower the list price on your home, then the answer is likely yes.
The longer a home sits on the market, the more buyers are likely to glance over it or write it off as something wrong with it. If the market has rejected your price, it's time to adjust your position.
There are differing opinions as to the amount of time you should leave a home on the market before considering a price reduction. Most real estate agents will tell you anywhere between two and four weeks.
Anyone in today's market should not be afraid to drop their list price if their home has been on the market for several weeks with no serious interest,
If your home has had few showings, negative feedback from buyers, and no offers, it's likely time to cut the price.
I've had some clients get very upset when I've advised them that a price reduction was needed. But sellers who hear this from their agents should take care to not blame the messenger.
Agents don't control the market. We navigate it.
Sellers and their agents tour and visit other similar homes to gauge the current competition. Sometimes the market has shifted, and the only way to see if from a buyer's persepective is to tour the homes that are competing with yours to see how a buyer would compare them and value.
How much should you reduce the price of your home?
Even with price reductions, it's still a seller's market.
The goal is to cut the price to where it feels like a great value and get multipe parties interested.
How much you ultimately decide to reduce the list price depends on the condition of the home, the original price point, and the current market. But as a general rule, you want to cut the price in one fell swoop, rather than trim bit by bit over time.
One large price reduction is usually better than multiple smaller price reductions. One larger price reduction has the best chance to rest urgency in the market for that paricular home and strike up activiy between multiplt bidders.
How a price reduction can lead to a bidding war
It is still possible to get the best deal for your house, even after you've reduced the price.
Get your home listed again with a considerably lower price. Plan an open house for a few fays after placing the house on the market, and make it accessible for viewings. Keep any offers off the table until after the open house. As a result of anticipating competition, prospective buyers might make greater bids.
If, the price reduction is leading to buyers giving lowball offers, it is up to you whether you wish to entertain those offers at all.
If those are the only offers you are receiving, you can also counter with a higher price, but then offer seller concessions. Concesions could include paying some of the buyer's closing costs, giving credit for repairs, or perhaps agreeing to a longer closing.
Pal, Meera. “Is It Time to Slash Your House Price? Reductions Aren’t as Bad as You Think—and Could Even Spur a Bidding War.” Real Estate News & Insights | Realtor.com®, Real Estate News & Insights | realtor.com®, 26 July 2022, www.realtor.com/advice/sell/should-you-reduce-the-price-of-your-home/.
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