Struggling to sell? Does it feel as though the potential buyers are all worried about the economy (or about “buying at the top of the market”)?
Or maybe they can’t get the loan they’d hoped for, given the recent rise in mortgage interest rates.
If so, you might wonder if it’s time to lower your asking price. Then again, is it better hold tight until excited buyers show up?
Here, we walk through the pros and the cons of reducing a home’s asking price.
Timing Is Everything. And Sometimes, a Price Reduction Makes Sense.
From 2020 all the way through mid-2022, sellers have been doing very well. Not only have many received their full listing prices; some of them attracted multiple bids that went higher than they expected. The market changed in late 2022. Homes are starting to linger on the market. If your home doesn’t sell right away, what’s the best action to take?
When all else fails, the saying goes, lower your expectations. There’s more than a grain of truth to that suggestion. After all, homes are in short supply. So, if a home lingers on the market, it might well be overpriced.
Here’s the reality today, as 2022 draws to a close. Despite the ongoing shortage of homes, the market is beginning to cool. Sellers aren’t attracting multiple bidders as they could in 2020-2021. Some sellers must lower their original asking prices to prompt potential buyers to make offers.
When is the right time to reduce? A home for sale tends to get the most viewers in the first three to four weeks. No action, then, means a price reduction is almost certainly in order. Consult with your agent to be sure.
Remember that mortgage rates are sharply higher than they were a year ago. Sellers need to keep buyers’ struggles in mind. And this can mean reducing the price.
The silver lining? The place you are moving to may also be reduced.
If I Must Reduce the Price, How Will I Know When My Price Is Right?
There’s no exact science to making a price reduction decision. But the longer a listing lingers, and the more optimistic the original price is, the more substantial a price adjustment should be. Sometimes, one reduction isn’t enough.
You agent might suggest that you start by reducing the price by .5% to 5%, depending on how attractively your home is currently priced. Your agent will check the median time for comparable homes nearby to sell. A reduction could make sense if your home’s been on the market for a longer period than the norm.
Also, you’ll want to consider the price categories, and how your own listing fits in. For example, a seller might reduce a $315K listing to $299K. The home will now show up when buyers set their search filters to find homes for sale under $300K.
As a general rule, trust your reputable real estate agent’s guidance. Part of the selling process involves knowing the least you can let the home go for, and knowing your bargaining range.
☛ Learn more: Here’s how a real estate agent works for you, to sell your home at the best possible price.
Spring Is the Season for Sales. Maybe Holding Out to Get My Home’s Listing Price Will Pay Off?
Then again, if you’ve been hoping to sell in the wintertime, waiting for the market to warm up could make sense too.
Attom, a real estate analysis firm, reviews U.S. home purchase data. The firm has found that autumn and winter buyers are the least likely to pay over the listing prices. That is, December through February is typically a slow time for home sales. And buyers who enter the market after that period, in springtime, are more likely to pay the full listing price or more.
But on the other hand…
Much will depend on where mortgage rates wind up in the springtime, and how consumers are feeling then. Seasonal trends are powerful; yet the state of the economy also plays a major role in the home sellers’ success.
☛ What’ll this market do in 2023? The news isn’t the greatest for sellers. Property values could drop through the year — perhaps 8% nationwide. Consider Austin, Texas (where prices rose 60% since the start of the pandemic). The tide is turning, as Austin home prices are already down 8% from their mid-2022 peaks. Property values, say economists, may not rise again until late 2024.
If you do decide to wait in this kind of market, consider having your home professionally cleaned, staged, and recorded for photos and videos, if you’ve not done so already. High-quality photography and videography encourages potential buyers to spend time looking at your listing.
Alternative Strategies: What Else Can I Do to Attract More Buyers?
Of course, home improvements, like replacing that old HVAC system or adding laminate flooring to the kitchen, could spruce up the interior and make the home more attractive on the internet and in-person tours. That said, if the price is right, many potential buyers won’t mind making ordinary repairs or improvements.
Check out the other local listings, and how the photography looks. A home could sit on the market if there’s a good variety of listings, if it’s priced higher than others, or if competing listings are renovated. So, be sure your home is in good shape, relative to others of similar size in the same area.
Tidying, staging, and generally showing your home off in its best possible light cannot be stressed enough. Today, potential home buyers of all backgrounds and generations are using their computers and phones to browse the listings. They have the option to set alerts and follow markdowns. When they find price drops, they might become interested.
The sooner a home seller can spark that interest, the better. Buyers might steer clear of homes listed month after month. A long-lingering home for sale can suggest that other buyers have found good reasons to ignore this home.
But buyers are not just comparing prices and looking at who’s making markdowns. Buyers are using online resources to check what local homes look like, inside and out. Expect buyers to gain a familiarity with what’s around your home. To attract a buyer, think like a buyer.
The Way to a Successful Home Sale: Here’s the Best Tip of All.
We hope this discussion helps you think through your decision. Still, we can’t offer financial advice. It’s your agent who knows your situation and the local market, and can counsel you on keeping or rethinking your listing price.
The best tip of all applies at the very beginning of the seller’s adventure. Choose an experienced, communicative real estate agent — one who’ll tell you what you really need to know.
Supporting References
Erik J. Martin for Bankrate, LLC (part of Red Ventures) via Bankrate.com: Is It Time to Cut Your Home’s List Price? Here’s How to Tell (Mar. 9, 2022).
Deeds.com: The Truth About Buying a Home in Winter (Nov. 30, 2022).
Katie Krzaczek for The Philadelphia Inquirer: The Best Time to Buy a Home Could Be Right Now (Oct. 14, 2022).
ATTOM Data Solutions: Steep Drop in Mortgage Lending Continues Across U.S. in Third Quarter, Hitting Three-Year Low (Nov. 17, 2022).
And as linked.
Photo credits: RODNAE Productions, via Pexels.