How Fast Do You Drop The Listing Price?

By
Real Estate Broker Owner with Catarra Real Estate, Inc CA BRE #01191946

The old phrase "time is money" is more true in real estate than most industries.  The longer a home sits on the market, the lower the final selling price relative to start price.  This is true in Los Altos and the rest of Silicon Valley.  In this part of the world, a home priced right relative to location and condition will sell in a week or so.  Ongoing negotiations might push that sell date out to 3-4 weeks.  However, if there's no activity - no disclosure packages downloaded, no offers (verbal or written), and few or no duplicate showings, then it's time to drop the price.

Stage 1:  Reduce the price after 14 days on market

A price reduction in the first two weeks is ideal because the home is still "fresh" in the eyes of the market.  Consider it a "do over" because you priced it so high.  Buyers will forgive that little indiscretion just this once.  If you push the reduction to 30 days or more the home will no longer have the same fresh feel and buyers will wonder what's wrong.  While the listing is still considered "new" and buyers are intrigued with it, keep their attention with a price reduction.  The percentage of the reduction depends on how far the asking price is over the suggested valuation.  If the original suggested listing price was $1,398,000 and it's priced at $1,600,000 (with no buyer prospects), then the price needs to come down to at least $1,498,000 and would be better at $1,398,000.

Stage 2:  Reduce the price after 45 days on market

As a rule, if a home is listed for more than 10% over the comps it will lose over 90% of potential buyers.  They skip it because it's overpriced.  In stage 1, I used the example of a home priced at $1.6M that should be $1.4M and suggested an initial price drop of $100K.  By cutting the overpricing in half, I recaptured half the buyers.  However, pricing within 3% of the anticipated selling price will get me over 90% of the buyer market.  So if the home has been on the market for over 30 days, it's time to get the price down to exactly where it needs to be.  This is because buyers now regard the property as being stale, possibly with problems, and likely to offer less than the asking price.  In Los Altos, 45 days on market is still not too long so coming down to the market price will likely get at last one offer.

Stage 3:  Over 60 days on market

At this stage, the home starts to lose value.  Looking at Los Altos homes on the market longer than 60 days, many receive offers and ultimately sell for less than the original target listing price - market value at the beginning of the listing.  This isn't always true, but often.  Pricing right to begin with prevents losing value.  It also makes a strong case for making fast price reductions.  Keeping the Los Altos buyer pool engaged is critical in retaining value.  The home in the examples above might ultimately sell for $1.35M which is abotu 97% of the target asking price but that means it would lose $50K from what it could have gotten in the first place.  It's important to price right to begin with but if not, fast price reductions are essential.

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  1. Charles Stallions 01/16/2013 06:08 PM
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Topic:
Real Estate Market Trends
Location:
California Santa Clara County Los Altos
Groups:
Realtors®
San Francisco Bay Area Real Estate
Tags:
quick
realtor
real estate
sale
home
property
reduction
listing
price drop
fast
los altos

Comments 33 New Comment

Rainmaker
46,514
Roy Paeth
FHA USDA and Homepath Mortgage Loans Illinois NMLS
Command Capital Mortgage Services

Great explanation Bryan based on the responses it sounds like you are spot on for your area.

March 02, 2011 11:52 PM
Rainmaker
398,263
Richard Yates
Because Experience Matters

Bryan, Congratulations on being FEATURED.  I think you did an excellent job of laying out a reasonable timeline for appropriate price reductions. I agree with your timelines and personally do not recommend a price reduction prior to 2 weeks unless there are special circumstances.  I believe in marketing a property and that may require more time to fully implement a marketing plan.  If it has been 2 weeks and no showings or just a couple of showings, it may not be the price, but lack of exposure to the right group of buyers.  Why are they not coming.  Is price the reason?  It usually is, but, occasionally it is not the price.  It might even be the weather.  I always seek feedback from agents, buyers or neighbors, but, without that, I go back to the competition to see if anyone else has sold or how we compare to the remaining active listings. Great job and best wishes always.   

March 03, 2011 09:21 PM
Rainer
332,837
Paul Gapski
619-504-8999,#1 Resource SD Relo
Berkshire Hathaway / Prudential Ca Realty

wow what a good post. i will save this and show sellers to get price reductions. ty

January 28, 2012 10:06 AM
Rainmaker
215,860
Mark Montross
Listing and Buyer Specialist
Catamount Realty Group

I really like this post. The two week price reduction idea is great. I would like to incorporate that one!

October 22, 2012 06:16 PM
Rainmaker
1,234,950
Charles Stallions
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.
Charles Stallions Real Estate Services

We have it in our contract to reduce every 30 days by 10% a month.

January 16, 2013 06:04 PM
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Bryan Robertson

Innovator, Writer, Speaker
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Additional Information

Read about news, reviews, and commentary about current events and trends in the real estate industry. I also write about local markets including Silicon Valley and my hometowns - Los Altos and Saratoga.