Home sellers today might find themselves encountering a sharp and painful divide between their hopes and reality. The hope, of course, is that their house will quickly fetch multiple offers way over the asking price. The reality? Their property might sit for a while, perhaps with no offers at all.
At that point, sellers might have to contemplate what not long ago was unthinkable: slashing the asking price of their home.
While price reductions might have been a rarity during the red-hot seller’s market of the past couple of years, they’re becoming increasingly common today. Realtor.com listing data shows that the share of homes that reduced their list price reached 14.9% in June versus 7.6% a year earlier.
Why have price cuts on listings nearly doubled? Because many home sellers have yet to adjust their lofty expectations against the harsh new reality that has rapidly taken over the real estate market today. Mortgage rates are up, curbing homebuyers’ borrowing power. The number of listings on the market is up, too, by18.7% in June compared with last year.
Meanwhile, home prices have already started falling in some parts of the country, all of which adds up to the fact that those legendary days of $100,000-over-asking bidding wars that sellers might fantasize about may largely be over. And, if your home’s current price doesn’t reflect these new conditions, it might just sit there until you do something about it—like slash the price.
Truth is, a price reduction could even bring on that bidding war that could drive a home’s price higher than before. But there’s an art to pulling this off. To help, here’s a guide to pulling off a successful price reduction today. We’ll break down how to know when it’s time, and how exactly to go about trimming your listing price without sounding the death knell to buyers.
How to tell if it’s time to reduce the price of your home
If you’re asking yourself whether you need to lower the list price on your home, then the answer is likely yes.
“The longer a home sits on the market, the more buyers are likely to glance over it or write it off as something wrong with it,” says Stephen Michalakos, a real estate agent with Engle & Volkers St. Petersburg in Florida. “If the market has rejected your price, it’s time to adjust your position.”
There are differing opinions as to the amount of time you should leave a home on the market before considering a price reduction. Most real estate agents will tell you anywhere between two and four weeks.
“Anyone in today’s market should not be afraid to drop their list price if their home has been on the market for several weeks with no serious interest,” says Tomas Satas, CEO at Windy City Home Buyer in Cicero, IL.
If your home has had few showings, negative feedback from buyers, and no offers, it’s likely time to cut the price.
“I’ve had some clients get very upset when I’ve advised them that a price reduction was needed,” says Ken Sisson, a real estate agent with Coldwell Banker in Studio City, CA. But sellers who hear this from their agents should take care to not blame the messenger.
“Agents don’t control the market. We navigate it,” Sisson points out.
Flavia Berys, a real estate agent and founder of Bookmark Realty in San Diego, recommends sellers and their agents tour and visit other similar homes to gauge the current competition.
“Sometimes the market has shifted,” she says, “and the only way to see it from a buyer’s perspective is to tour the homes that are competing with yours to see how a buyer would compare them and the value.”
How much should you reduce the price of your home?
Even with price reductions, it’s still a seller’s market.
“The goal is to cut the price to where it feels like a great value and get multiple parties interested,” says Matt Hawkins, a real estate agent with Real Broker in Seattle.
He recently had motivated sellers who had listed their house for $950,000 in Everett, WA. After a week with two to three showings a day and multiple calls from agents of interested buyers, they still hadn’t received an offer. Since the sellers were moving out of state and needed to sell to find their next home, Hawkins didn’t have to do much persuading. They reduced the price to $900,000.
“A few days later, we had three offers and more coming in, but my seller wanted to get things wrapped up so we didn’t wait,” Hawkins says. “We ended up with an offer of $925,000.”
How much you ultimately decide to reduce the list price depends on the condition of the home, the original price point, and the current market. But as a general rule, you want to cut the price in one fell swoop, rather than trim bit by bit over time.
“One large price reduction is usually better than multiple smaller price reductions,” Sisson says. “One larger price reduction has the best chance to reset urgency in the market for that particular home and strike up activity between multiple bidders.”
How a price reduction can lead to a bidding war
It is still possible to get the best deal for your house, even after you’ve reduced the price.
“Get your home listed again with a considerably lower price,” says David Tully, a real estate agent with eXp Realty in Reno, NV. “Plan an open house for a few days after placing the house on the market, and make it accessible for viewings. Keep any offers off the table until after the open house. As a result of anticipating competition, prospective buyers might make greater bids.”
Once you receive offers, he recommends returning to the leading bidders and requesting their highest and best offers.
If, however, the price reduction is leading to buyers giving lowball offers, it is up to you whether you wish to entertain those offers at all.
If those are the only offers you are receiving, you can also counter with a higher price, but then offer seller concessions. Concessions could include paying some of the buyer’s closing costs, giving credit for repairs, or perhaps agreeing to a longer closing.