Pricing a home properly for sale can be a tricky proposition, especially in this market. Back when I first began selling real estate in early 2004, if a home didn’t blow out in the first week or two, it was assumed that something was wrong with it. I mean, this was a time when agents were writing offers on the hoods of their cars during open houses. Nothing stayed on the market long.
Now, though, in this new world order, reductions are commonplace. There can be plenty of reasons for reductions that are really no cause for alarm. There are plenty of times a seller insists on testing the waters at a higher price to start off with. Anyone who knows me knows I think this is a terrible idea, as the first two to three weeks you’re on the market are the most critical, but sometimes you have to try it that way first if that’s what a seller wants. All I can do is give them the information they need to make the right decision, and hope they do so. Don’t get me wrong—sometimes we as agents are overly optimistic about how much a home might sell for as well. It’s not an exact science.
In Los Angeles, there can be so many different sizes, price ranges, types and styles of homes all within a few blocks of each other, it can be difficult to price properly right off the bat. The most important rule, generally speaking, is that you want to put a number on it that causes people to walk in and see all the great things about the house, and cause them to feel that it’s a good value for the price. If you go too high over that sweet spot, people will walk in and find everything wrong with it, decide it’s not a good value and likely move on.
If you overprice a home at the start, it will sit and sit, become a stale listing and you will ultimately end up selling your home for less money than you would had you priced it correctly to start with. Every day that your listing sits on the market, you are losing money. The longer it sits there, the less it will ultimately sell for. As a general rule, I like to lay out up front with a seller the concept of pre-planning reductions, should they become necessary. For example, if we’re not getting any offers in two to three weeks of being on the market, a price reduction needs to happen. If we aren’t getting very many calls or showings, then we might need to consider a more significant price reduction.
When the reduction happens, make sure it’s enough to actually get the phone ringing. A series of very small, inconsequential reductions might not serve you well. This is what we call “chasing the market.” If you aren’t getting any action, you need to get ahead of the market and price to sell.
In this market, buyers are more savvy and more cautious than they have been in the past. They are taking their time, because they can. Some are still waiting for the market to bottom out. This assumes it hasn’t already—one thing I am constantly trying to impress upon my buyers is that you can’t time the bottom of the market. How do you know when it has hit? By the time you do, it’s on its way back up. But I digress. My point is that buyers won’t buy a house in this market if they feel like they are overpaying.
When a price reduction happens, appropriate marketing opportunities should be utilized as well. If your listing agent isn’t holding open houses every Sunday, one should definitely be held after a price reduction, and the reduction should be highlighted in any ads that run for the open house. A ‘brokers open’ should also be held to bring in agents who might not have seen it the first time or don’t remember it. The listing agent should use all of the marketing tools at his disposal to get the word out about the reduction, and make sure both agents and buyers (who tend to do their own internet searches these days) know about it.
If you’re thinking about selling your home, or would like a free market analysis of the value of your home, please don’t hesitate to call me. I’ll be happy to be of service!
Jefferson Hendrick is an L.A.-based Realtor with Keller Williams. Contact him with questions, concerns and real estate inquiries at [email protected] or facebook.com/jeffersonhendrickrealtor.