Price Reductions: What does this mean?

Question

I'm just starting my research about the Huntsville and surrounding areas. I've just been looking through the active listings on Realtor.com and I've noticed that a lot of the listings that have price reductions are reducing their prices by ~10% after 1-2 weeks on market. To me, that seems fairly quick to drop your price. What would you say this indicates? Are sellers getting nervous that properties aren't being valued at what they think it should anymore and quickly dropping to get a sale? Are the amount of strong offers shortly after listing decreasing? Are sellers getting desperate for a sale due to COVID? What's your take on how to interpret this "trend"?

Michael S. · Answer

None of the above. . .the market here is crazy hot.  Those starting prices are similar to Zillow's "make me move" price listing.  They are shooting for above market value to see if someone is desperate enough to pay it with how tight inventory is here - if no takers after 1 to 2 weeks, they are then dropping their asking price to more realistic "fair market" values.

Darius Ogloza · Answer

In a very, very hot market, if no interest is shown in 7-10 days, then the price is off and by lowering it you get into a new band of buyers who set price limits on their search engines.  One interesting local example: house listed for $1,495,000 showed no traction at all.  Price reduced to $1,395,000; sold within a week for $1,595,000.

Rebecca P. · Answer

I agree with @Michael S.

Often the strategy seems to be start high and quickly reduce or price low to encourage a bidding war (especially anything under 150k anywhere near Madison). For example, we are around the corner from a house that recently went on the market and was well priced. The door almost stayed open the entire day with revolving buyers. It had so many offers we didn't even bother. It closed in less than a week.

Kevin Phu · Answer

Awesome insight! Thanks! It makes perfect sense. How would you use these price reductions to determine a fair price? What if the listing keeps going down and down and down? Possible that there are major issues that they are hiding?

Mike H. · Answer

I agree with Michael. Price reductions I’ve been seeing is people listing with a stupid price.  Looking in Atlanta right now and see a lot of price reduction. Most houses reducing have problems or listed way too high or I’m also seeing the 1m + listing not moving too quickly and seeing them reduce a bit

John White · Answer

I agree with @Michael S.; pretty rare to find a desperate seller on the MLS in this market. Anything in a good area with a reasonable price will have multiple offers and go at listing price or higher.

Price Reductions: What does this mean?

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