By: Dian Hymer
September 15, 2003
Imagine this. When you listed your home for sale, your neighbors told you that you priced it too low. Even so, buyers aren’t beating down your door to make an offer. What should you do?
First, take neighbor’s opinions about the value of your home as a compliment, but nothing more. Homeowners in your area are eager to see higher property values. But, their price opinion may be nothing more than wishful thinking. What you need is a reality check.
One of the most difficult real estate principles for sellers to grasp is that market value is set by buyers, not by sellers. In fact, the very definition of market value is the price a willing and able buyer will pay.
Sellers are usually the last to know current market trends. Buyers, generally, are much more in tune with local market conditions because they’re actively engaged in the home-buying process. They see more of the inventory of homes for sale than do most sellers. They know what’s selling and what’s not. Sellers usually have to rely on their real estate agents to keep them informed.
HOME SELLER TIP: Make sure you receive market updates from your agent. If not, let your agent know that you expect to be kept informed about current market developments, at least on a weekly basis.
You’ll want to know if there are new listings on the market that are competing for the same buyers that you are. How do these listings compare to yours, in terms of price, location, size and condition? How quickly are listings like yours selling? Have any competing listings sold recently? Did the buyers look at your listing? If so, why did they decide to buy something else?
Ask your agent to follow up with the agents who showed your home to get feedback. Resist the temptation to follow up with the agents yourself. This puts agents in an awkward position, and you’re not likely to get the straight scoop. When confronted, most agents will tell you they like your home rather than risk offending you. Your agent is in a better position to elicit a candid response.
Don’t be surprised if the feedback you receive is ambiguous. For example, you may hear that a buyer turned your house down because it had too many stairs or was on a busy street. Not because the price was too high. A savvy listing agent will help you read between the lines. If your home has an incurable defect—something you can’t change—you need to discount the price so that buyers have an incentive to overlook the defect.
You may hear that your home was turned down because of cosmetic defects that can be changed. If you can afford to replace the worn carpet or get rid of outdated colors, do so. Then have your agent schedule new open houses for agents and buyers to show off your new look.
Cash-strapped sellers have two options. One is to credit money to the buyers at closing to cover the cost of the new carpet or paint job. The other is to lower the list price. Of the two, dropping the price is preferable because a reduced price will attract a larger pool of buyers.
You should adjust the list price as soon as you discover it’s too high for the market. The longer you wait, the bigger the risk your listing will be overlooked as more new listings come up.
THE CLOSING: A significant price reduction should have a significant impact. A good rule of thumb is to reduce the price by about 5 percent, or at least to a price that undercuts your closest competitor.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
