Drop the price to sell?

32 Replies

Hello BP community,

I am currently in the process of selling my own home. My wife and I have rehabbed it over the last three years, and now we are going to sell and use the profits to house hack!

The house has been on the market for a month, but there has been no traffic this last week. The first two weeks saw tons of traffic and over 25 people between two open houses.

We are priced fairly competitively (only two comparable cheaper in our town), bit I am wondering if I should start dropping the price. We are located in an A neighborhood with VERY desirable schools, but on a busy street by the train. 

What  would you all do? Drop the price to repopulate on Zillow, Trulia, etc? Leave it alone because it's the Holliday season? We really want to sell so we will have the capital to accelerate our investing.

I'm not familiar with your market, but around here house sales has entered the Dead Zone until spring. Lack of traffic (IMO) is more a characteristic of the time of year if you had that many people the first two weeks. If you are competitively priced - you have to be honest here, as people have higher opinions of their own home than the market, usually - there's nothing to be gained by price slashing other than to appear desperate, or to hope to snag an extra buyer or two that is just a peg below your asking price. Exception might be if you are priced just over a natural break point that excludes some traffic, i.e. you are priced at 305, 255, 201, etc. In that case, a modest drop can pull more traffic through searches into your property. 

@John Warren  Pricing a house correctly so it sells quick can be a really tricky thing.  This is one of the greatest challenges I face on every project.  Every house has it's own "personality". What concerns me about your situation is that you said there was tons of activity and now there's very little.  The first wave of buyers in an active market will tell you if your house is priced right.  If you get a lot of showings but no one makes an offer, you are almost certainly over-priced for your specific house.  The busy street and train can easily eliminate your house from other comps that don't have those negatives.    

Dropping the price is always a good strategy to keep the listing fresh on your local MLS as well as Zillow, Trulia, etc but in your case it sounds like you're going to have to move lower to get the pricing in line with the market. Good luck!

@JD Martin thanks for the feedback! I have my license and  trying to be very objective about price. Our home is a five bed/ 2 bath priced at 329,000. I have been inside all of the competition homes in the last week, and most of them are priced 30-40k higher. 

I definitely am trying to gage whether this is just the "time of year" or if I am too high

@Michael Woodward thanks for your thoughts! Our neighborhood is challenging since no house is identical and many homes are a lot older. Most of our comps are in bad locations to, but it is definitely possible I started too high. Would you drop in my situation going into he holidays, or wait till January/February time?

At that price you really have nothing to gain by dropping the price in my experience, as no one walks around prequalified for $320k or odd numbers like that. You would have to make a significant slash to bring in the next group of homebuyers - down to $299 - and if you are already 10% below the rest of the market you may actually elicit questions and super inspections on "why are you so cheap for this unit". Buyers generally know what range something should be selling for, so if you dump the price significantly after a couple of weeks it will either signify something is wrong with the property or you really need to get out from under it. IMO - if I saw you drop the price 5% or more after that time frame, I would probably offer you 90% of your asking price, max. 

What size is your house? You mentioned fine schools - few people with children move during the school year, unless they are staying in the same district. If the house lends itself to a family, they are even less likely to move during the holidays. Houses look ugly during the winter, as everything is dead and barren. You may be better off rebooting and trying again in March or April when things start warming up (and heating up in the market). Since you have your license, you should be able to pull stats on home sales in your area during the last (12, 24, 36, whatever months) year; what does history say about sales numbers during the year?

One other thing: a drop in traffic after a good open house or two doesn't necessarily mean anything in my experience; you get a whole lot of "lookey-loos" who have no real intention of buying a house during open houses. If you had 25/30 appointment showings, with no offers or comments, that would be a lot more concerning. 

@John Warren

If 25 people have come through in the "slow time" - for all intents and purposes lets say 50 would have come through during the busy time. Without seeing your house and not knowing your market, if that many people are coming through and not a single offer, something isn't right, and the easiest place to start, is price. 

@John Warren Yes.... I would make an appropriate reduction right away. That will get you closer to the right price point and it will trigger your listing to hit you local MLS "hot sheet" (assuming you have it listed with an agent) and it will also refresh on Zillow and the other online sites. I've sold houses within a few days of both Thanksgiving and Christmas so I wouldn't wait until after the holidays to get your price in line.

Respectfully, I don't agree with Jd's position.  People set maximum purchase amounts on their searches (and can be pre-qualified for any amount) so if you drop your price to a point that falls within their criteria, they will likely take a look at your house. The bottom line is that exposure to agents and the general public is what sells houses. No one will look at every house in their price range so a good strategy is to keep getting your house in front of the public as much as possible. If your house is one of the five that they look at, you've got a decent shot at getting it sold (if your price is right). 

@Michael Woodward

@Mark Gallagher

@JD Martin

Thanks for the advice. I  am definitely considering dropping the price again. 

I just realized that I can easily post a link to the zillow add. At least then you guys can see the pics! Here it is.

http://m.realtor.com/#details?property_id=74459953...

Originally posted by @Michael Woodward :

@John Warren Yes.... I would make an appropriate reduction right away. That will get you closer to the right price point and it will trigger your listing to hit you local MLS "hot sheet" (assuming you have it listed with an agent) and it will also refresh on Zillow and the other online sites. I've sold houses within a few days of both Thanksgiving and Christmas so I wouldn't wait until after the holidays to get your price in line.

Respectfully, I don't agree with Jd's position.  People set maximum purchase amounts on their searches (and can be pre-qualified for any amount) so if you drop your price to a point that falls within their criteria, they will likely take a look at your house. The bottom line is that exposure to agents and the general public is what sells houses. No one will look at every house in their price range so a good strategy is to keep getting your house in front of the public as much as possible. If your house is one of the five that they look at, you've got a decent shot at getting it sold (if your price is right). 

 That's OK, I don't offend easily :D 

My take is that we are viewing this from different angles. As a realtor, you are programmed to sell that house at (more or less) any price that can be had, because the incremental difference in your commission between $280 and $320 is $600, which isn't a lot of money when you consider making either $4200 or making nothing because the house is too close to the competition. In other words, in my dealings with realtors over the past 25 years, my experience is that realtors will always tell you to drop the price in order to move the house, irrespective of whether the price is truly the reason the property is still unsold. There is a buyer for everything, at nearly every price. Of course there are more buyers at $299 than at $329, just as there would be more buyers at $259 than $299. 2 weeks on the market, with only open house traffic to look at, is not enough data to determine the price is too high. IMO. 

Originally posted by @John Warren :

@Michael Woodward

@Mark Gallagher

@Jd Martin

Thanks for the advice. I  am definitely considering dropping the price again. 

I just realized that I can easily post a link to the zillow add. At least then you guys can see the pics! Here it is.

http://m.realtor.com/#details?property_id=74459953...

 Beautiful house, very impressive. If it is that empty right now (ie those are current photos) I would seriously consider staging those rooms. Buyers have a whole lot less imagination than you would think, and you sell on emotion first, reason second. 

@John Warren

Without knowing your market, I would think that kitchen might be *too* trendy. 

Without knowing your market, I would think that you should get rid of the wooden trim in some of the rooms. You have beautiful photo after beautiful photo and then you get to those rooms and it's a let down. People want a 100% finished product. 

@JD Martin @Mark Gallagher

Thanks again! My wife and I may have made the wrong choice not to stage... Only time will tell I guess. We also Mia have made the wrong call on the trim upstairs. I almost painted it white, but then a friend was saying how nice the wood looked. I personally Have hated it forms day one!

The kitchen was done long before we considered making this change. We would definitely have done generic colors/granite/stainless if we had thought we would sell... Live and learn I guess!

@John Warren

If you have the funds/availability, I would remove it from market and change those things. You're likely going to recoup at the very least every dollar you invest, I would imagine.

Great looking house. I agree that the bedrooms are a letdown in comparison to the rest of it. Painting the trim white seems like the quickest, cheapest and easiest thing to do in regards to that.

Other than that if your itching to sell a price reduction is the way to go.

leave the price alone for a while.  My last house had seven or eight showings one week, then nothing the next week.  Then several more the week following.  A realtor told me to drop the price.  The next day I got a full price offer.  Sounds like you had a group of buyers who cycled through when the listing was new.  You didn't snag any of them.  Some may have been tire kickers.  Maybe they didn't like the busy street as you mentioned.  That can really hurt.  But at this point, you are now in the slower season as mentioned.  I would not drop more than once.  So if you are ready to drop already, make it the one and only.  

Story I forgot to add: about 20 years ago we were selling a townhouse in a townhouse community. Several of the units in the development were selling for $130k. We had done a few fine items, such as a high quality tile backsplash, and our unit was a couple of years newer. We decided to price at $140k. Our realtor was adamant that we would never get that, because a new townhouse subdivision that was under construction just down the street was selling new units in the $140s. I looked at the units and they were builder specials, everything low-quality. We held firm on our $140k list price. We ended up selling the townhouse for $146k, as two buyers got into a bidding war (we actually had 3 full-price offers before the bidding war). The difference according to our buyers? Our upgraded finishes and a townhouse in better condition than the ones for $130k.

My point in all this? Know your market. If you truly have a better product, and are not deluding yourself because you are too close to the product, stand your ground. There's no guarantee you won't ever have to lower your price - not all buyers, or all areas, will care about the same things - but there are buyers for good products. 

Apparently nobody here really understands sales. Dropping the price is the worst strategy. It makes you look foolish and sends the wrong signals to potential buyers who will now offer even less because you have just shown your cards.

Let's look at the economics of a house sale;

We have a buyer who is going to most likely get maximum leverage from a lender at an unprecedented (and absurd) 3-4% interest rate.

An agent looking to make highly taxable earned income (the real loser in this whole scenario). 

The seller who is looking for a hassle free and quick sale.

So, you drop the price $5,000 because your house isn't selling and you think this marketing 'strategy' is going to do the trick. Let's pretend you get an offer at your new asking price (but you won't. You'll get one an additional $5K less). The buyer closes and the mortgage payment is $22.45 less per month (3.5% rate) than if he/she paid full price. An amount that isn't even a consideration when home shopping. The agent makes $125 less. Again, not an amount that will kill a transaction. You make $5,000 less. A significant dent in your net profit. Ouch!

Let's look at this from another perspective. Agents are highly unethical people. They are also greedy pigs. Most suck at what they do and try to live off the 5-6 houses they sell each year. A pathetic income. What if, instead of giving away a large chunk of your profit which you should only do as an absolute last resort, we increase the commission (bribe if you will) from 3% to the selling agent to 3.5%. Instead of giving away $5K, you give away an additional $1,645. That is $3,355 more for your pocket.

Now, that lazy, greedy, sucks at her/his job real estate agent looks through listings on Friday morning preparing for the house showings to be done on Saturday and sees 2%, 2.5%, 2.5%, 3%, 2.5% and then your 3.5% commission pops up. Honey stop the car! (I effing hate that stupid, stupid marketing gimmick.) Which house do you think that agent is going to show? Which house do you think that agent is going to push onto their buyer and convince them that it is THE house they should be offering on. I'll go one step further and say that they might not even show any other houses or really bad houses and then bring them to your castle and say something lame and cheesy like, "Well, this one is a bit out of your budget, but it is truly THE BEST priced house on the market today. It probably is already in escrow, but let's go take a look just in case it is still available."

I typically increase my commissions by as little as a 1/4 %. I just raised one last Thursday (always the day to do price decreases or commission changes so it shows up on Friday's searches as "new") and guess what I got in my inbox on Monday morning? Full price offer on a house that is in a very challenging area. 

This is how you do sales and it works like a charm. Take advantage of what the market gives you - greedy, lazy, sucky agents. Pay them more for their suckiness. Pander to their laziness and watch your listings fly off the shelf.

My wife is mega agent in Lexington and she is having great success in selling properties quickly and she always says if alot of people are coming through the door and no offers it is most likely price.  Every market is different; however, most of the midwest has seasonal markets.  The busy season is the summer (April-September) and the slow season is October-March.  This summer was extemely good for real estate across the country and I would check and see when the comparables sold.  If they sold in the busy summer season that may be the problem as markets around the country have slowed down and we are going into winter.

Tricks we use are to stage the house.  It sounds like you are getting great traffic so you should have great feedback for all the agents that did not make offers.  Listen to the feedback and that will tell you what the market thinks about the home.  We never listen to everything, but if the same items come up again and again they need to be addressed.  If traffic slows we use a picture of the best room in the house, hopefully the kitchen, and put it as the mls photo, instead of the front of the house, and this seems to help get more traffic if there is a awesome room in the house.

A small price reduction could help stimulate interest again and zillow has a feature where you can do a $1,000 buyer incentive and your house will show up in specailized advertising. Just a few tips.  Good luck and have a great day!

Originally posted by @John Warren :

@JD Martin @Mark Gallagher

Thanks again! My wife and I may have made the wrong choice not to stage... Only time will tell I guess. We also Mia have made the wrong call on the trim upstairs. I almost painted it white, but then a friend was saying how nice the wood looked. I personally Have hated it forms day one!

The kitchen was done long before we considered making this change. We would definitely have done generic colors/granite/stainless if we had thought we would sell... Live and learn I guess!

For me, the kitchen issue isn't color or finish.  Yes, it's taste specific, but it presents ok. However, you have no cabinet uppers.  Even though you have a pantry, you still have a small kitchen with limited counter hand cabinet space......for a 5 bedroom house.

Then there's the bedroom question.  1550 square feet is just too small for 5 BDRs.  However, there is a buyer that values quantity of bedrooms over square footage.  The unpainted trim is really noticeable in the pictures.  It may present differently in person.  Those rooms look unrehabbed and unfinished.  The trim and finish of all the rooms should hang together and not call attention to itself: trim, hinges and doorknobs, etc are better all the same IMO.  

The comps are interesting to me.  Plenty of recent nearby sales at a much higher sq. ft. price.  But those houses are are 2000+ square feet, have fireplaces and are generally "more house".

I don't think you've given it enough time to know if price is really the issue.  Be sure to get as much feedback as you can from the buyer's agents. I think the advantage you have is that your house is smaller so it's more affordable for some buyers that want to be in that area.  It's that buyer, and/or one looking for many bedrooms that is probably a good match for the house.

Originally posted by @Aaron Mazzrillo :

....... Take advantage of what the market gives you - greedy, lazy, sucky agents. Pay them more for their suckiness. Pander to their laziness and watch your listings fly off the shelf.

 Laughing very much out loud. Made my day.

@John Warren location location location. A busy street can be a deal killer. If you cannot find comps on a busy street such as yours, the ones you have will probably not be a good indicator of value. My suggestion is: if you are making a good profit, and possibly a tax free profit, start reducing it regularly until you get a sale. Your other option is to sit tight and wait for a buyer at your higher price. Good luck either way you choose to go.

@John Warren I would recommend staging like @JD Martin stated.  Based on the listing and the pictures, I gotta imagine the bedrooms are small, given that its a 5bed and less than 1600ft2.  Staging would help, as most people can not image a room fitting furniture when it is empty.  I also personally agree with the comments about painting the trim, but that is not something that I would personally change at this time.

Are you getting feed back from other realtors that the price is too high? If not, I agree with others that might not be the best answer. Its not like you are talking about that many DOM's. 

Next, honestly how does your bathroom compare with the comps? Looking at the pictures, it appears to me that some of your choices were very budget conscious (I use the same vanities and mirrors in my rentals). This might be a a real let down with prospective buyers.  If would be for me.

The kitchen from the pictures looks nice, and unless you totally hate the look, I dont think its putting many buyers off.