Although the Silicon Valley real estate market remains hot, and generally is a strong seller’s market, not every home is selling in 2-3 weeks. At some point, sellers may wonder if they should lower the list price.
While being overpriced is not the only reason why a property won’t sell, that is the case 90% of the time or more. The first question is whether or not there are enough showings to generate a sale. If not, then the problem is significant. If there are showings, what is the feedback? Why are buyers not writing an offer?
How soon should you lower the list price?
Most of the time, if the property is unsold after 21 – 30 days, it’s time to reevaluate the marketing strategy. Is the home easy to see? (If showings are too restrictive, they won’t happen.) Is the house or condo presentable – clean, well lit, tidy, without bad smells and so on? Are the photos good? If all of this is in order, it’s time to consider the finances.
The biggest piece of the marketing effort, of course, is price. (Please also see Why didn’t my San Jose home sell? for info on other remedies to real estate not getting pending.) if the home isn’t selling, it may be time to lower the list price or asking price.
Usually, the main reason why a home doesn’t sell is that buyers think that it is overpriced. Sometimes you, the seller, can compensate by improving the condition or some other relevant factor, but often, the solution will be to adjust or lower the price.
How much should you lower the list price?
It really depends on what the market reaction has been – no traffic, light traffic, or heavy traffic? The colder it is, the more likely you’ll need to take stronger measures.
Recently I visited an open house in which there’d been less than a 1% price reduction after 30 days on the market. That very minimal kind of repricing tells a buyer “I’m not budging”, which the buyer may read as “My price is high and I’m unreasonable; move along, this is not the house you seek”.
It’s all about the traffic
First, how much activity is your property getting? How many showings per week?
If you are getting at least 3-5 showings per week, but no offers, you are probably close on price. Perhaps a smaller reduction, combined with some other adjustment (restrictive hours loosened up, scary pets removed, alarm disarmed) may do the trick in getting you more traffic to create a viable offer.
If you are getting NO showings, or close to no showings, you may well be way, way high on your price or have other major issues which need to be corrected. My general advice, below, may not apply in that case as you may need something more to get the qualified traffic in through the door. The more qualified traffic you get, the better your odds are of selling. An atractive price is the bait that can attract those buyers.
Here are two old rules of thumb, which I think pretty much still work today:
- for every week it’s been on the open market, lower it $10,000 (so a reduction in 3 weeks would be $30,000 or a reduction in 5 weeks would be $50,000)
- alternatively, for every week it’s been for sale and active on the MLS, lower it 1% of the sale price (hence at 3 weeks, a 3% reduction would be appropriate and at 5 weeks a 5% reduction would be indicated)
Every situation is, of course, unique, so it’s important to look at the big picture. If buyers and agents are staying away because the home smells of pets or cigarette smoke, or if there are people constantly home during showings (you should all vacate), or if you demand that the listing agent be present for all showings, any of these things can drive away qualified traffic. But if the marketing is good, the home is clean and reasonably accessible, and all the other basics are correct, it probably is price. Sit down and talk with your Realtor to get good guidance. If those who have shown the home have provided feedback, take it to heart – whatever that input is.