Anytime past one to two weeks on the market would be a good time to start evaluating your price. But in a hot market, you may know within days. —-
You’ve heard of friends and family who recently sold their home for a wild price in a matter of days — or sometimes hours. So you’re surprised when your house doesn’t get snatched up right away in a fast-moving and seller-friendly market.
Perhaps you’ve seen little to no showing traffic, or the people who do view the home vanish like ghosts after a tour, never to be heard from again.
With every passing day, your level of concern grows: Did I price too high? How long do I wait before reducing my house price?
“It all comes down to comps,” says Ryan Lundquist, a certified residential appraiser in the Sacramento area. “If you’re looking at stuff in the neighborhood and you’re seeing sales and similar properties getting into contract, and you’re not generating any activity, you want to start asking yourself what the problem is.”
Let’s take a closer look at how to know when it’s time for a price drop and methods for evaluating your pricing strategy if your home isn’t selling.
How long before a home’s price is reduced?
Anytime past one to two weeks on the market would be a good time to start evaluating your price. But in a hot market, you may know even sooner whether you’re overpriced, within a few days of listing based on how fast other homes are selling.
According to a 2021 report from the National Association of Realtors®, recent buyers paid a median 100% of a home’s asking price, and 96% of homes that were listed on the market for less than one week did not reduce their asking price.
In total, 16% of recent sellers did reduce their asking price once, while 5% made two price reductions.
The likelihood of reducing the list price increases the longer the house sits on the market. While 10% of sellers reduced their asking price after one to two weeks on the market, 28% did so after three to four weeks, and 36% made a reduction after five to eight weeks.
And if you have reason to believe you’ve overpriced your home, a swift price correction is going to be better than continuing to wait additional weeks. Statistically, the longer your house sits on the market, the less it will sell for.
How many times should you drop your price?
Ideally, you should only drop the price of your home once.
When sellers agree a price reduction is necessary, Stephanie Termine, a top real estate agent in Cleveland, often recommends an 8% to 10% decrease. “If we’re not getting any traffic on showings those first few days, then we probably missed the mark by that much,” she says.
While Lundquist says there’s nothing wrong with a 5% reduction, dropping your price by 1% may not be worthwhile. It’s generally not enough to attract buyers searching in a different price range.
Unfortunately, though, it’s likely to grab the attention of buyers and their agents who have been shrewdly tracking the market.
“It’s really tough when you miss the mark on price in the beginning because buyers are very savvy, and they get alerts that your price has dropped,” Termine explains. “Then they become more critical and think, ‘Oh, we can negotiate now.’ You’re opening up the door to those negotiations.”
That’s when buyers start asking sellers to include home warranties and closing costs, Termine says.
Dropping the price once is probably the best approach for selling your home quickly and without a lot of additional negotiation or hassle. If the revised price is right the second time around, you can hopefully avoid further delays.
Revisit the comps for guidance
As Lundquist says, house comps — or recently sold nearby homes with similar characteristics to yours — should be the North Star of your pricing strategy.
Here are a few tools to check the comps and whether your price is in line:
Get an online home value estimate
To find out what your home is worth, you can get a quick online home value estimate from a tool like HomeLight’s Home Value Estimator. Our tool combines your home’s last sale price with recent sales records for other properties in the same neighborhood. We also ask a few specific questions about your home to add another layer of information to our estimate.
Enter your address and fill out a short questionnaire, and we’ll provide a preliminary home valuation in less than two minutes. But remember that the strength of an online home value estimator is speed over accuracy. Think of it as a starting point or one tool in your toolbox as you research your home’s price.
Consult with a top local real estate agent
Because of their constant engagement in local markets, top real estate agents are an invaluable resource for determining price, marketing your home, and managing all aspects of a sale.
Experienced realtors complete a comparative market analysis, which takes into account the price of recently sold properties in your area with similar square footage, overall condition, and number of bedrooms and baths.
They factor in special features including a renovated gourmet kitchen or lake view. They also take into account a mountain of other market trends including price per square foot for the area and the total supply of unsold homes.
“I arm sellers with this information and facts to help them make their decisions,” Termine says.”
Find out all that goes into a comparative market analysis and how it can help you adjust your asking price if needed.
Get an appraisal
One HomeLight survey found that 52% of top real estate agents say the biggest challenge sellers face is the temptation to overvalue their homes. That’s especially true as the market shows signs of slowing. In fact, 54% of agents have recently seen buyers back out of contracts due to inflated list prices.
“The best thing sellers can do is listen to their agents and listen to the market,” adds Lunquist. But, if sellers and their agent differ by 15% on price point, Lundquist suggests paying for an appraisal to mediate the discussion.
“An appraisal can be a valuable tool, providing tons of additional insight,” Lundquist says. The third-party evaluation can both determine value and predict how much a buyer’s lender would be willing to underwrite.
Request your home’s Simple Sale price
When you request a home value estimate from HomeLight, we also ask our network of cash buyers to make you a real offer on the home. Usually, this offer is around 90% – 95% of your home’s market value. If you’re overwhelmed with the traditional listing process and trying to guess what buyers will pay, get started with Simple Sale today.
How can you tell if your price is off?
“A lot of sellers are not super realistic about what they can get for their homes today,” Termine agrees. “When I sit down with a seller, and my comps and my data don’t match what they think they can get, we have to have a very honest conversation.”
Here’s what that conversation might sound like:
You’ve exceeded the “days on market” average for your area
Days on market refers to the time between when a house is listed to when it goes under contract with a buyer. Properties remained on the market for an average of 19 days or a little less than three weeks in December 2021, according to the most recent data from the National Association of Realtors®.
Solution: Days on market metrics vary by area; check with your agent about how fast other nearby homes are selling compared to yours. Revisit your agent’s marketing plan: Is your home being promoted properly online? Have you accurately assessed your home’s condition? If you’ve accounted for these factors, the problem is probably price.
You’ve had showings but no offers
You’ve dropped everything to clean up your home and accommodate a showing request more times than you can count. But each tour ends up being fruitless, leaving you scratching your head as to what could be wrong. “If we don’t have an offer within 48 to 72 hours — and we’re getting a ton of traffic and showings — then we’ve probably missed the mark on price,” says Termine.
Solution: Rule out other potential culprits such as a defect like a weird smell or a damaged kitchen counter that could be surprising buyers when they visit the home. As a next step, you might bring in a friend to view your house with an objective lens and provide feedback or tour neighboring listings for a fresh perspective. Doing so may provide clarity as to whether your price is accurate.
The market has recently shifted
2022 remains a low inventory market where home prices continue to rise, but experts expect a modest correction compared to the previous year. Some buyers have been priced out of the market, causing bidding wars to cool. Mortgage rates soared past 3.5% in late January after a year of record lows, which could further dampen demand.
Solution: If the comps you used to price your home are three to six months old, you may need to revisit your decision using more recent sales, or even pending sales that haven’t closed yet. It may be helpful for your listing agent to reach out to the agents of any comparable homes as soon as they enter escrow to find out what they’ve sold for before the information is available elsewhere.
Regina Madiera-Gorden, a top real estate agent in Tacoma, Washington, says she worked with sellers who knew of a house down the street with a similar floor plan that sold in two days for $20,000 above asking. However, in a mere four months since the neighbor’s sale, “The velocity of the market had really slowed, so we had to adjust our price,” Madiera-Gorden says.
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What else could be wrong with my price?
Here are a few other pricing traps real estate experts caution against:
You’re looking for a unicorn buyer
Every market is different and has its own metrics. So, while some hot national headlines might lure you into pricing above the market, “you shouldn’t expect miracles,” says Lundquist.
Buyers occasionally have the capacity to pay any price and agree to any terms to get the property they want. But, “you don’t want to price for those unicorns; you want to price for the market,” says Lundquist. “If you get lucky with a unicorn buyer, then that’s wonderful.”
You’re straddling price brackets
For decades shoppers have affirmed the power of 99 as a pricing strategy in retail. Staying under a threshold even by one unit — paying $9.99 instead of $10 — makes consumers feel like they’re getting a deal.
However, that tactic doesn’t usually work well in real estate. What does work is understanding how buyers search for homes and making your home easy to find by placing it in the right price bracket.
According to NAR, the step 43% of buyers took in their search process was to look at properties online. While they can be customized, the parameters on most real estate search engines are preset in round numbers with ranges from $100,000 to $1.8 million.
“If you price your home at $299,999, you are missing the folks who are searching in that $300,000 and up range,” Termine explains. “I encourage my sellers not to straddle a price bracket.”
Her experience also shows that buyers explore homes within $25,000 increments. For example, they may consider homes within the $300,000 to $325,000 range.
Pricing your home correctly propels your listing into the right bracket and increases the chances it will be viewed by buyers prepared to pay for a home in that price range.
Still Convinced Your Home Is Priced Correctly?
Then, maybe it’s not the money. Before lowering your asking price, make sure your marketing and home presentation is hitting the mark. To increase your chances of sale, be certain that you’ve checked the following boxes:
1. Your home is accessible to buyers and their agents
Since a home is usually a family’s largest investment, it’s no surprise most buyers want to get a feel for the property first hand. They may want to even walk through multiple times before they make an offer.
If you have very limited hours for showings or open houses or listed the property before it can be shown, then lack of access could be the problem.
“Even with great photos available online, potential buyers still want to see your home,” Lundquist explains. “Real estate agents usually recommend sellers wait until the home is ready to be visited before they put it up for sale.”
2. Your home looks move-in ready
When buyers visit a home with overgrown landscaping, bizarre paint colors or outdated features, “All they see is additional money they have to spend,” Termine says.
To get the best price and appeal to the greatest number of buyers, you should:
Paint with neutral colors
Replace dated and dirty carpets
Deep clean and declutter
Spruce up your landscaping
3. Your listing includes professional photos
Many real estate agents work with professional stagers and photographers to ensure each room looks inviting online. Our experts have also compiled a list of DIY design and staging tips to help your home look its best for buyers.
4. Your listing highlights neighborhood charm and walkability data
Your listing should be a love letter to your home — telling buyers about everything that makes it special. Be sure your description includes not only the best features of your property but nearby schools, parks, theaters, restaurants and other attractions locals love.
5. Your listing mentions your home’s trending features
A little research into what’s trending in real estate can pay big dividends. Search home and design blogs for the hottest amenities and highlight those assets in your home.
For example: Since the pandemic began, Lundquist says, there has been a rise in the popularity of larger homes as well as property with patios, pools and other outdoor living areas.
6. Your marketing plan targets the right buyers — particularly if you have an unconventional property
Homes with quirky features, unique layouts or unusual locations aren’t for everyone.
For example, a split-level home might take longer to sell than a ranch-style layout in a neighborhood attractive to older buyers. But, right buyers — maybe a multi-generational family — will be thrilled to find the perfect place.
If an unusual property is priced right but not selling fast, Lundquist advises sellers to have a little patience and listen to the market. “Your unique property might just need more exposure time,” he says.
In addition, HomeLight experts have a number of ideas of how to make your home and your listing more attractive to buyers.
If your price is perfect, your home looks its best and your marketing is reaching its targeted audience, showings should increase and, hopefully, offers will follow.
Are there other options?
Even if the reduced pricing doesn’t yield the ideal buyer, sellers still have other options.
One alternative is to remove the property from the market for a while. After a little reflection, a refresh of the property and maybe a new agent, you can list the property later with a plan that makes your home more attractive to the target audience.
Another consideration is selling the property as-is through HomeLight’s Simple Sale platform. With Simple Sale, HomeLight’s provides all-cash offers for homes in almost any condition nationwide. Sellers can skip repairs, staging, and showings, and can close in as little as 10 days.
In any case, the right price can overcome pretty much any property-related obstacle. As they say: Price isn’t always the problem, but it’s usually the solution.
Header Image Source: (Roger Starnes Sr / Unsplash)
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