In general, when you reduce the price of your home, you are hoping to generate more activity – to attract new buyers, and to tempt those who have already seen the property to give it another chance.
However, if the reduction is too small, in most cases, it will do nothing to generate more activity. Instead, it will let buyers and brokers know you are softening.
This could bring you to a weaker position in the marketplace, especially if your home continues to sit on the market. It not only weakens your negotiating position with buyers, but it can cost money, time, effort, and precious frustration.
When can a reduction be dangerous?
When you reduce, you send a message to buyers and brokers: “We’re getting tired of waiting!”
A reduction is also a sign that the home was overpriced in the first place.
If the reduction is inadequate, instead of generating renewed interest, it can signal to buyers and brokers to wait for future reductions – until the home hits a price they feel is appropriate.
And not only will you fail to accomplish the goal of re-attracting interest, but you’ll also likely end up throwing away tens of thousands of dollars in the process – while your home continues to sit.
But let’s focus for a moment on the really savvy buyers: the sharks!
Unlike most buyers and brokers, when a house is clearly overpriced, the savvy shark gets in the game before there’s even been a reduction – to get a feel for the seller and build rapport with them.
The savvy shark knows they’re probably the only game in town (the only ones making an offer at that price), which can give them a lot of leverage.
If they don’t get in on an overpriced home right away, the shark might get in the game at the first reduction, even if it’s insufficient. They might circle the property, and make an offer that’s lower than the reduced price.
The savvy shark first makes a low offer to see if the seller bites. Most sellers won’t.
But now the shark is building rapport, in the hopes that the seller will eventually be tired enough (and trust the shark’s serious interest in the property enough) to sell the home to the shark, instead of continuing the laborious effort of finding another buyer.
It’s important to know that this doesn’t happen overnight. This process can take months, sometimes as long as a year.
But the savvy shark is patiently stalking its prey – YOU!
(Keep thinking of that shark analogy, wearing its prey thin, and then pretending to befriend its prey so it can catch it off-guard.)
Because the property was insufficiently reduced, the savvy shark knows the time to get in is before the price is right.
Most buyers will not make an offer on a house that is way overpriced. Why? Many people worry they’ll offend the seller by making an offer well under the asking price. They feel this is the price the seller wants, so why bother?
Obviously, the best thing to do is price the home correctly in the first place – to generate enough interest in the property with the goal of getting multiple competing offers. This puts you in the best negotiating position.
However, sellers often have an emotional blind spot when it comes to their home, and they often overvalue their property. It’s human to be attached to our home. Most people fall into this category, even realtors – we’re human, too!
So, if you find yourself in that position, and you have to make a reduction, please be careful.
The reduction has to be substantial enough to change everything for the buyers and brokers who have already seen the home – or the reduction could become pointless.
Be strategic when taking this step. No one likes to reduce, but if you do take that step, you want good results.
I’m happy to share more about this or any other topic of interest to you – give me a call, text, or email anytime, or connect with me on social media.