A common question sellers ask is, at what point should they lower their price once their home is listed for sale?
Some sellers wonder if the home was priced too high to start with. Since there is not an “absolute” initial asking price, as long as the price was set based on what the market looked like at the time, then it wasn’t necessarily priced incorrectly; it’s just that the market is not responding to the current price and an adjustment is probably called for.
So, how does a seller know if their home is priced too high for the current market, and at what point should the price be lowered? Well, it depends on the property, the situation, and the market. However, there is a common rule of thumb that seems to work well in the marketplace and it’s this:
If a home has been on the market for two to three weeks, or has had ten buyer showings, whichever comes first, then it’s time to lower the price.
The next question is, if a seller is going to lower their price, then by how much should it be lowered? There’s really no good rule of thumb here. However, many Realtors® say a price reduction should be a minimum of 3% of the current price (if it’s significantly overpriced, then a much larger reduction may be in order). Again, this can vary depending on the property, the current price, the current competition, and the marketplace. It’s critical here to seek the advice of your Realtor®. The key here is to “listen to the market” and what it’s telling you. Your Realtor® can interpret the market and make a recommendation on how much to reduce the price.
Price reductions that are too large can result in a seller “leaving money on the table,” while price reductions that are too low, that “chase the market,” are almost as bad, if not worse, than no price reduction at all. The biggest mistake a seller can make is to reduce their asking price by an insufficient amount and chase the market. In every case, the seller will lose money. Again, the advice of your Realtor® is vitally important.
By the way, if a price reduction doesn’t get the home sold (again follow the rule of thumb above), then additional price reductions may be necessary. Remember… if a seller tries to “argue” with the market, the market will win every time.
The bottom line: If your home hasn’t sold within the appropriate time frame (rule of thumb), then talk to your Realtor® about a possible price reduction. The longer you wait, the more money you may be losing.
For more useful information about selling your home, keep checking back here.