When Should A Seller Lower A Price On A Listing?

June 25, 2008

On another website–Trulia–I was asked this question:

Should home sellers continue to lower prices in tandem with the National/Regional trend were house value is going down or should you stick to a price and await offers?? The crux of the question is does lower price = more showings and offers??

 My response was:

Make sure your home is in the lowest (least expensive) 20% of the comps for your specific property. So, for instance, to oversimplify, if you have a 4 bed/2.5 bath home on 1/4 acre and the comps for similar homes in your neighborhood are $500,000, $505,000, $510,000, $515,000, and $520,000, then your house–to have the best shot at selling quickly for a reasonable price, should be priced no higher than $505,000.

Real estate is local. You’re competing against the comps for the buyers. So, from a purely pricing standpoint, you absolutely want to make sure that the buyers view your house, and that your house is priced attractively.

That also means the comps you use, in today’s market, should be as fresh as possible. Try to keep them within 3 months. Certainly no longer than 6 months. Then, every month, have your agent run the comps again.

The attractive price and good marketing will get more viewings. The final piece of the puzzle is that your house needs to show well. That’s the connection you need between “more showings” and “offers.” Make sure your house is in good shape. Consider using a home stager. Listen very closely to any suggestions your Realtor makes. You may not aesthetically agree with the suggestions of a Realtor, or even a stager. But a stager will make your home look good. And a Realtor knows what buyers are looking for.

A final point, obvious but necessary to state: There’s a relationship between price and how long a property takes to sell. That’s true even for reasonably priced properties, and even in warmer markets than we have now.

If you’re using a Realtor, ask the following question: “If I price my house at $X, how long do you think it will take to sell?” To use the example above, there’s no one absolutely “right” price. But it’s reasonable to assume that if you price your property at $499,999, it’ll probably sell somewhat faster than if you price it at $509,999. If you need the extra money or can afford to wait, perhaps price it higher. If you need to sell right away, or you don’t need to squeeze the last dollar out of the transaction, consider pricing it lower.

In a decling market, though, you absolutely don’t want to be “chasing the market.” Or, as is sometimes described, you don’t want to try to catch a falling knife.