Advantages and Disadvantages of Home Price Reductions

According to a report, over a third of listed residential properties in the U.S. underwent a reduction in price of 1% in October 2018. This represents the highest share of discounted listings in the past eight years. From a couple of years ago, the proportion of homes available on discount increased by over 6%, when only one-fourth of all listed homes had price cuts.

The price reductions indicate the housing market of the country is cooling, where rapid price appreciation and rising interest rates have some property buyers recalculating their budgets. Whether you call it home price reduction, adjustment, or an improvement, nobody wants the real estate prices to dip except a buyer.

The Pros and Cons of Home Price Reductions

Homeowners expect to sell their house quickly. Especially if you live in a fast-moving housing market, you will want to sell your home fast. However, what do you do if the offers do not start rolling in as you expect? A report says 12.9% of home sellers reduce the price of their property.

However, if you are planning for the home price reduction, remember that the longer your house is on the listing, the lower your odds are of selling it for the listed price. If you accept the offer within first week, you will have 57% chance of selling it on a list price. For the second week, the chances drop by 7 percent, and then to 38, 31, and so on.

Unless you are selling a house in a high-demand and low-inventory market, it is risky to list your property under the market value. Not to mention, some homeowners use this strategy to increase the chance of receiving multiple offers from potential homebuyers and quick sale over the asked price.

However, it is important to mention here that this tactic could backfire if you are selling at a low price and receive only one to two offers for the asking or even less. In such a situation, it is difficult to negotiate with buyers, since they are not in a competition with another buyer.

Nevertheless, if there is a strong demand for home, pricing it low could help sell the property at or over the listed price. However, if you receive only one offer, do not price lower than what you would be willing to accept.

Price it Right

When you do not get good offers, you may consider reducing your home price continually until you hit that buyer’s expected number. The process is called ‘chasing the real estate market down.’ However, this will give buyers the impression that there is something wrong with your property. Besides, they will also wonder how much lower will your property’s value go and decide to wait until the value dips to their expectations. It is in your best interest to make one price reduction.

When to Lower Your House Price?

Before reducing the price of your residential property, make sure to ask yourself some questions. If your home is not selling, there could be several reasons behind it. This could be something not even related to your listing price. Therefore, it is imperative to identify those reasons first and then make the final decision.

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