We’ve had our property on the market for a while and there’s been very little interest. How long should we wait before reducing the price?
Tough question, and maybe not the correct one to be asking. The first question I’d ask is whether or not your property is priced properly–at or near market value. Assuming it is, I’d look at recent sales activity in your town/market. One way to do this is to calculate what’s called an “absorption rate.”
Let’s say there are currently 75 residential properties on the market and in the past six months there have been 26 sales… statistically speaking there is a 1.44 year supply of inventory. So if you’re priced correctly and your property has been on the market for a couple of weeks… well, calm down. In that situation, unless we get ahead of the current 75 listings, it could take a year and half for your property to sell.
Reducing the price is only one of the ways to get ahead of everybody. There’s a lot of emphasis on price these days, and the tempting conclusion is to think the price sells the property. What sells the property is locating a ready, willing, and able buyer. So the real question we need to ask is “how are we going to find a buyer?” Part of that consideration is “are we priced too high to attract a buyer?” If you’re close to market/appraised value, the answer is “probably not,” so sit tight.
(Bear in mind market value can change very quickly and you should be revisiting your price position regularly. And don’t forget that market value is both science and art.)
The exception to this is when a property ends up priced so low a buyer can’t resist it. I remember years ago my mother came from shopping once with a container of “drip” grind coffee. We pointed out that she didn’t have that kind of coffee maker and she replied, “But it was so cheap I couldn’t resist it!” That’s an example of price “creating” a buyer.
So price may “create” a buyer. But you still have to ask yourself “How many buyers can I create by reducing to an irresistable price?” Remember that if you only consider price you are competing with foreclosures… and that IF you can create a buyer with an amazingly low price that buyer STILL needs to either have the money or the ability to borrow it. I have a couple of low priced properties that generate frequent calls. Most of the calls start with “will the owner finance?” Guess we didn’t create a buyer after all–or at least not a qualified one. Would you be surprised to learn that another question is “Is that price negotiable?”
If you make it all about price… it will be all about price! Sell your property, not your price.