Strategic Pricing: When To Lower House Price To Attract Buyers

Lowering the asking price of your property might seem like a setback in the home selling process. But, for home sellers facing a lack of offers, it’s often a step that’s necessary to align with market dynamics and buyer expectations.

Strategic pricing is essential in today’s challenging real estate landscape, where buyers are highly informed and have access to information on properties and the market-at-large like never before. Let’s explore the importance of strategic pricing and ways that home sellers can know how and when to reduce their asking home price to attract strong buyers.

Understanding Housing Market Dynamics

Market conditions serve as the driving force behind fluctuations in home prices, acting as the invisible hand that balances the scales of supply and demand. Many factors can shift real estate market conditions and influence home-pricing strategies.

Consider these variables when deciding if you should reduce your home’s listing price:

• Economic factors
• Consumer confidence
• Mortgage interest rates
• Local economic conditions
• The average number of “days on market” (DOM) for homes in your region

All of these items have the potential to shift real estate market conditions and influence home-pricing strategies. Sellers and their real estate agents should remain mindful of such ever-changing dynamics. Keeping an eye on these factors will make it easier to be competitive with comparable homes.

Market Types: Buyer’s Vs. Seller’s Market

Pricing a home effectively requires knowledge of the current market. In a buyer’s market, there are more homes for sale than buyers, which may necessitate a lower price from the seller. Conversely, a seller’s market typically allows for higher pricing due to greater demand.

What Makes A Market?

As the old adage goes, “Real estate is all about location, location, location.” Pay close attention to the local and national economy, along with your area’s housing market conditions. Comparing your home to a home several counties over may not be a fair comparison. While you’re likely to hear national news outlets make broad comments on real estate trends, keeping tabs on local market conditions is far more important.

Assessing Your Home’s Value In The Current Market

Sometimes called the sales comparison approach to price setting, a comprehensive analysis that considers several factors is the first step in assessing your home’s value in the current market. The Multiple Listing Services (MLS) will be very helpful, but there are other ways to determine your home’s market value and the appropriate selling price.

The Importance Of Comparative Market Analysis (CMA)

A comparative market analysis enables sellers to set a competitive asking price based on the sale prices of similar homes in the area. Comparable home sales, or “comps,” provide a benchmark that shows what buyers have recently paid for similar homes nearby. Also, your home’s unique features, such as upgrades or location advantages, can add to the perceived value.

An accurate home appraisal and advice from a seasoned real estate agent are also critical in setting a price that reflects both the market trends and the inherent value of your property.

Factors To Consider When Setting Your Asking Price

When choosing an initial listing price, sellers should consider both internal and external factors. Additionally, the original house price should align with the perceived value that potential buyers see when comparing your home to other houses in the neighborhood. Items to consider when setting your initial price include:

• Whether you’re listing your home in a buyer’s or a seller’s market
• Recent comparable properties and home sales in the area
• Whether you’d rather sell quickly or get the best price
• Setting the right listing price to spur interest and attract early bids
• Any unique features and upgrades of your home
• Methods you and your agent intend to use to market the property
• Access to an online listing or scheduled open houses
• Advice from a trusted local real estate agent

Signs It’s Time To Consider Lowering Your Asking Price

Nobody wants to leave money on the table, but there comes a time when a price cut can be the strategic move needed to spark interest and attract potential buyers. Plus, a well-timed price reduction can be a catalyst that initiates a new round of showings.

Here are several signs that it’s time to make the call.

Lack Of Interest Or Showings

If your home’s asking price has been set but the home remains on the market significantly longer than the average days on market (DOM) for similar homes in your area, it’s likely that the price isn’t meeting buyer expectations. Reviewing the average price reduction in your area could provide insight into how much you may need to lower your listing price to align with market expectations.

The length of time your home sits on the market can be a strong indicator that a price revision is needed. An extended period without serious inquiries or showings is a good reason to revisit your pricing strategy.

Feedback From Potential Buyers And Real Estate Agents

Listen to your audience. A consistent recommendation for a price adjustment can indicate a change is necessary. If feedback is virtually unanimous about the price being greater than the home’s value, readjusting the price may be the key to engaging hesitant buyers. Feedback about issues other than pricing can be important, too. Pay attention to any concerns related to the neighbors and past events involving the property, and keep an eye out for any comments that could cause buyers to hesitate.

Comparable Homes Selling Faster

If similar homes are selling faster, this is a strong indication that your asking price doesn’t align with current buyer expectations. Keep an eye on the average days on market in your region. If similar homes are moving off the market more rapidly, it might be time to reassess your asking price.

Deciding How Much To Reduce Your Listing Price

If you’re thinking of lowering your asking price, you may wonder, “What is the average price reduction on a house?” The amount you reduce your home’s price should be based on thorough market research and consultation with your real estate agent. Understanding the average price reduction for recently sold homes in your area can guide you in setting a competitive and realistic price for your property.

Revisit Comparable Sales Data

Review comparable sales data through housing market reports, paying close attention to local homes that have sold in the past 6 months. Analyze these properties’ sizes, conditions, locations and prices at the time of sale. This data will provide valuable insight into what buyers are willing to pay and how your home stacks up against the competition.

Consider Market Trends

Understanding whether you’re in a buyer’s market or a seller’s market is key to knowing when to offer a lower house price. It will heavily influence your pricing strategy and how quickly you may need to act on adjusting the price if you want your home to sell.

Try A Psychological Price Reduction Strategy

Setting a price just below a rounded number (e.g., $299K versus $300K) can provide a psychological advantage in attracting buyers. It can also help your home stand out from similarly priced properties. Implementing such a price cut can often lead to a quicker sale because it appears to be a better deal.

Strategically Time A Home Price Reduction

Timing is everything in real estate. If your home has been on the market for a while and garnered little interest, it may be time to reduce the price. However, if you’ve recently listed your property and are receiving substantial interest and just haven’t received the right offer, you may want to give it more time before changing your listing price. Real estate agents generally don’t recommend multiple price reductions in a short period of time because this can send an unintended message to buyers that the property is overpriced or has issues.

Consult Your Real Estate Agent

Your real estate agent is your trusted advisor, and it’s wise to consult them before making any significant pricing decisions. Your agent should provide valuable expertise and market knowledge to help you determine the price decrease that best aligns with your goals and the current market conditions.

Home Price Reduction Alternatives

While a price reduction is often the most effective way to generate buyer interest, you can try other strategies first. These include:

• Hosting an open house or virtual tour to attract more potential buyers
• Making small improvements or renovations to increase the perceived value of your home
• Offering incentives, such as seller financing or money for closing costs
• Revisiting your marketing strategy to reach a wider audience
• Considering a lease-to-own option for buyers who may not qualify for traditional financing

The Bottom Line

While competitive pricing is important, don’t lose sight of your long-term goals. If your initial asking price isn’t generating interest, it may be time to consider a price reduction. However, continually adjusting the price downward can reduce your profit significantly in the end. Work closely with your real estate agent and monitor market trends to determine when and how much to adjust your price for maximum success.

Again, timing is everything. Pair up with an experienced local agent who can show you the best way to go about adjusting your selling price if this becomes necessary.