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How do you know when it's time to drop the price of your home?

Real Estate Pictures It's hard to know the right time to lower the asking price of your home, but there are a few key indicators to watch for. See more pictures of real estate.
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How do your fingernails look? If your house is on the market, they're likely bitten back a bit. But if your house has been on the market awhile without gathering bids, no one can blame you for chewing through a pack of press-ons a day. Simply, a house without interest is extremely stressful.

A fresh listing reaches the most potential buyers, and the highest rate of walk-throughs occur during a listing's first two weeks. After that, whether you're actually overpriced or not, you start to look stale. Buyers start to wonder what's wrong, and any bid you get is likely to be low.

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That said, there's no hard-and-fast rule for when to reduce your asking price (and by how much). Instead, it's the stuff of Web site forums and real estate blogs, with most questions posted late at night by sellers who have already bitten their fingernails to the quick.

Basically, you should be worried if your house has been on the market longer than the average Days on Market (DOM) for houses similar to yours in your neighborhood (check redfin.com or another reputable site for DOM).

Then, if you're over the average DOM for your neighborhood, check out the next page for some tips.

 

The first question to ask yourself is whether your price, the listing or your house is to blame. Are you getting tours but no bids, or are potential buyers simply staying away entirely?

If it's the first, people are intrigued by the house at the listed price, but are put off by something they see in the tour. Is it something you can fix? If so, you might be able to keep your asking price with some aggressive fix-up, cleaning, remodeling or home staging. If fixing the problem costs less than a price reduction, you might consider (quickly) doing the work. If you can't or don't want to fix it, you probably need to lower the price of the home.

But what if the phone is silent? In that case, it's a good bet your listing or the price is to blame. To figure out which it is, ask your real estate agent for an updated competitive market analysis (CMA). The CMA shows how your house stacks up to comparable properties. Take a clear-eyed look. If your house is, in fact, already priced in the lower end of the quiver of comparables, you might ask what your agent is doing to create interest. How's the online listing? Is it well written and illustrated with pictures that put your house's best face forward? If not, revise and repost it, or get a new agent.

But if your listing is fine and you're past the average DOM without interest, it's time to cut the price. By how much is another story, with the absolute minimum being $5,000 and the maximum being the amount that takes you to lowest price in the list of comparables.

Other reasons to reduce your asking price include an impending deadline (if you gotta move, you gotta move), or an obvious error in initial pricing, perhaps due to a quickly declining market, your unfounded optimism or an agent who quoted a too-high asking price in hopes of buying your listing.

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Sources

  • Filisko, G.M. "6 Reasons To Reduce Your Home Price." National Association of REALTORS®. March 19, 2010. (Jan. 5, 2011)http://buyandsell.houselogic.com/articles/6-Reasons-To-Reduce-Your-Home-Price/
  • Financial Web. "When to Reduce Your Home Sales Price." (Jan. 5, 2011)http://www.finweb.com/real-estate/when-to-reduce-your-home-sales-price.html
  • Hibble, Anna Marie. "Seller, reduce: 5 signs you need to cut your asking price." San Francisco Chronicle. July 22, 2010. (Jan. 5, 2011)http://www.sfgate.com/cgi-bin/blogs/ontheblock/detail?entry_id=68041
  • John, Ciaran. "How Much To Reduce The Price When Selling A Home." Bright Hub. Nov. 5, 2010. (Jan. 5, 2011)http://www.brighthub.com/money/home-buying/articles/86788.aspx
  • Showing Suite. "4 Ways to Check If It's Time to Reduce Listing Price." The Jeff Quintin Real Estate Super Team. (Jan. 5, 2011)http://www.jeffquintin.com/tips/4-ways-to-check-if-its-time-to-reduce-listing-price/

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