Price reductions are more common than you think. Here are a few different strategies for using them.
We’re back again to discuss another great real estate topic: price reductions and how they can fit into the process of a home sale.
Zillow recently did a study on price reductions of all the sold homes around the U.S. It said that 61% of all homes sold have had at least one price reduction, which constitutes a majority. At the same time, 29% of sold homes have had two or more price reductions.
Pricing isn’t an exact science because the market is always shifting. Different sellers use different strategies. For example, banks have a pricing strategy with the properties that they own where they price a home and stay firm. Then if it doesn’t sell within a few weeks, they’ll do a 5% reduction and keep repeating that strategy until it finally sells. This is kind of a gambler’s strategy and can create some urgency in a buyer’s mind. However, it’s not the best strategy if you’re trying to sell for top dollar.
Another strategy is to price at 95% of the home’s market value because our MLS average for the list price to sale price ratio is 95%. Most of the time what happens is that if a home is priced at 100% of its market value, someone will offer 90%, and they will split the difference in the middle.
Nominal price reductions tend to backfire because they’re simply done so that a property shows up as a price reduction. If you’re only reducing your price by 1 or 2%, buyers and their agents might think that you’re playing games with them and it could backfire on you.
If price reductions are done correctly, they’re more of a repositioning to move from where the market isn’t to where the market is. If you’re in a market where price reductions are happening frequently, it’s better to be on top of the ball here sooner than later.
Finally, know that price reductions do require some thought between you and your agent. Is the price you sell for now as a reduction a price you’re willing to take, or would you rather wait until next year? There is a lot of thought and market analysis that goes into a big decision like this.
I hope you learned a lot from this. If you have any questions about price reductions or about anything else related to real estate, don’t hesitate to give me a call or send me an email today. I look forward to hearing from you soon.