Home Sellers: When Is The Right Time for a Price Reduction?
Although they have a bad reputation, home sale price reductions are a valuable tool that home sellers can use to respond to changing market conditions and ensure their home sells as quickly as possible. At Properly, we will always suggest a price reduction or allowance instead of making cosmetic changes to a house before listing to ensure our client don’t lose money on the sale (despite what HGTV would have you believe).
Price reductions also have an lesser known marketing benefit – they move your home back to the top of MLS searches, so buying agents are more likely to have your property top of mind for their clients. Price reductions signal a motivated seller to experienced agents.
Our goal is always to get our clients the maximum value for their property as quickly as possible (and our average client does receive an offer in less than 30 days), but it’s important to have a plan ahead of time. Here’s our 4 step pricing strategy:
Step 1: Price at the top of the market
The best defense is a good offense. Our valuation philosophy at Properly is to price as aggressively as possible for your local market while still staying within the price per square foot bounds of nearby comparable homes (which you can see yourself instantly by getting a free home valuation). This way we can test the upper bounds of the market to maximize your equity while still ensuring we’re not overpriced.
Step 2: Develop a price reduction strategy
In most cases, we’ll include a price reduction plan in the original listing agreement. This plan states the timeline and dollar amount for price adjustments based on the local selling market. For example, if homes in your local market are selling in 30 days on average, we may plan on reducing the price after 3 weeks if we haven’t received any offers, and again in another 2 weeks if we still aren’t seeing activity.
Step 3: Look for market signals
Even beyond the price reduction plan, we look for market signals to determine the right time to reduce a price. If comparable homes in your area are reducing their prices, it’s probably a good idea to follow suit quickly to remain competitive. The same goes for new construction, which typically has the latest finishes and that new home smell.
Some agents use a “10 showings in 10 days” metric to signal a price reduction, meaning that if your home doesn’t get 10 showings in as many days, it’s time to reduce the price. We take a more nuanced, data-driven approach.
Consider Grant Park and Lake Claire. If you’re selling a 4 bedroom home in Grant Park, we’re going to be much more likely to recommend a price reduction if you haven’t received 10 showings in the first few days on the market. In Lake Claire, we may want to wait at a higher price for up to 20 days to find the right buyer because homes in this size and area tend to stay on the market twice as long.
Step 4: Inform prospective buyers of a price reduction
If a price reduction does happen, it’s important to notify all the buyers who saw the house since they have already shown some interest. This is one of the cooler “back-end” features we’ve built at Properly. If we do end up reducing the price of your home, our systems automatically texts and/or emails every agent who has shown the home to inform them of the new price and encourages them to write an offer. This way your listing is at the top of buying agents’ minds (as well as the MLS).
The ultimate metric for the success of a price reduction is receiving offers – that’s how we know that we are priced appropriately for the market. With a solid plan and data-driven analysis, we can maximize the home equity for all of our Atlanta home sellers while still saving them an average of $10,000 in commissions.