As a top real estate agent in the Kansas City area, I get asked a lot of questions. One of the most common questions from sellers is, “If our home doesn’t sell right away, how do we know when we need to lower the asking price?” My blunt answer is, “When the home isn’t receiving any offers,” but it can be a little more complicated than that.
First, let’s look at what you did to prepare your home. Did you make all the necessary home repairs? Did you replace old and worn out appliances, flooring, faucets, and light fixtures? This is the first place to begin before putting your home on the market. Buyers don’t want to do anything these days. They have no imagination, so please don’t think they’re willing to overlook that hideous wallpaper in the master bedroom. If you make all repairs and have some updated features, they are willing to pay a premium price for a move-in-ready home. I see hundreds of homes every month that do not sell because the sellers didn’t want “the hassle” of doing repairs or updating the home.
Second, did you use a professional home stager to make the home attractive? You’d be surprised at how much difference this makes. Among REALTORS who typically represent the buyer, 49% report most buyers are affected by home staging. 81% of buyers say home staging makes it easier to visualize the property as their future home. I pay for a professional home stager to work with all our sellers because I believe it’s one of the key reasons why our listings sell three times faster than most other agents’ listings. The buyer’s agents on my team tell me they can always tell when a home has been staged. It looks cleaner, brighter, and more attractive.
Third, did your agent use a professional photographer to shoot the photos? Home staging makes the home look great when you’re visiting the home in person, but professional photography gets them into the home in the first place. Just visit Zillow.com or Realtor.com and look down the long list of homes for sale. It should be apparent pretty quickly which ones are shot with a professional camera and which ones are not. In this tech savvy day and age, it still shocks me to see dark, fuzzy, out-of-focus photographs on many listings. It’s absolutely vital to have crisp, high-resolution photos of your home if you want to sell your home fast.
Assuming you’ve done everything previously mentioned above, and you’re still not getting any offers, there are only a couple of things left it could be. Either your home is not being properly marketed by your real estate agent, or the price you’re asking is too high.
Let’s start with the marketing. Someone asked me one time, “Other than put it on the MLS, what do real estate agents really do to market their listings?” Great question, and for the most part the answer for the average agent is, “Not much.” There are many things your agent can do. Open houses, post it on social media, run ads in various online or offline media, email a flyer to all the top agents in the area to make sure they see it, just to name a few. A running joke is there are “three P’s” in real estate. 1) Put up a sign. 2) Put it on the MLS. 3) Pray a buyer sees it and writes an offer. If your home isn’t receiving any offers, there’s a good chance you have one of these agents.
OK, now let’s get down to the meat and potatoes of knowing exactly when you’ll need to lower the asking price if your home is not selling. Most sellers believe their home is unique and warrants a premium sales price. They’re proud of their home and because they haven’t toured a bunch of other homes in the area, it’s tough to get a feel for the competition. That’s why they trust a professional REALTOR to be honest with them and know where they should price their home. The REALTOR has access to see most of the homes in the area and research comparable sold properties. They look at the features, layout, updates, and location of all the other sold properties to make a comparison of your home, and then suggest a solid asking price based on what comparable homes have sold for in the last nine months. Typically there is a price range of what those homes have sold for and if you price your home above that range, then it’s not going to receive many showings or offers.
It’s actually quite common that some sellers will want to start $5,000 to $15,000 too high in the beginning, but doing this is pointless because ultimately they’ll just end up lowering the price and take longer to get the home sold. Many times, starting that high will end up costing you more money because if the “time on the market” gets too high, buyers will make even lower offers on their price.
From experience of selling over 850 homes, my team is actually pretty skilled at selling our listings near, or at the very top of the price range. In the rare occasion we can’t get a home sold at the asking price and need to lower the price, we typically like to see two weeks on the market with around eight to ten buyer showings during that time. If ten buyers preview the home and don’t write an offer, then I promise you, the home is overpriced by comparison to what the competition is. I can’t control what the buyers are willing to pay.
Speaking of competition, if 50 homes come on the market in your area, the competition will get fierce. Some of those sellers will be more aggressive with their price and get their home sold quickly. Heavy competition will always drive prices down. Sometimes that competition can be new construction. In certain price points over $300,000 the spring/summer real estate market can get flooded with new construction homes. In those cases, a “resale” home will need to be priced much lower in hopes of attracting a buyer. That’s when I tell our clients this story. “Let’s say I’m shopping for a nice two year old, low mileage used car. I see one online that I like and go to a car lot to test drive it in person. While I’m standing there in the car lot, I look around and notice there are quite a few brand new cars at this same price. Guess which one I’m going to buy?”
When presented with the undeniable fact that the price needs to come down, the next question a seller asks is, “How much do we need to lower the price?” On average, if the home is priced under $240,000 then you’ll need to lower it $5,000 or no one will even notice the difference. If it’s currently priced over $240,000 then I’ll suggest a $10,000 price drop. I’ve had listings over $400,000 that had to drop $15,000 too. This obviously depends on what area of the city or subdivision the home is located in, but the reality is if you’re not getting any written offers, then you need to make a big price adjustment quickly.
In the last two years I honestly have only had to drop the price of one or two homes to get them sold, but as we move into a more balanced real estate market, I’m seeing many agents overpricing their homes. They will eventually need to have a hard discussion with the sellers about dropping their price. It’s a skill to price a home correctly and certainly something to investigate when hiring a REALTOR to sell your home.