By Diana Olnick
- It's a seller's market, but that doesn't mean every house will sell at any price.
- If a listing is overpriced and sits on the market for too long, it gets stale.
- The average time on the market for all homes nationally was 34 days in September, according to the National Association of Realtors, down from 39 days in September 2016.
High demand and low supply have made it a seller's market
pretty much all over the country, and especially for lower-priced homes.
That does not mean every house will sell or sell quickly.
Price is still important, especially as some markets begin to overheat.
The low number of listings has made the market more
competitive, pushing prices higher at a fast clip. Nationally, prices are up
about 7 percent from a year ago, and in the hottest markets they are up double
digits. Still, a house can be overpriced, and today's savvy house hunters can
smell an overpriced house a mile away.
If a listing is overpriced and sits on the market for too
long, it gets stale. Potential buyers will see the time on market and click
past your listing, often without even looking at it. That is why it is best to
lower your asking price before your listing hits the stale stage.
So when is that?
"I typically drop the price after the second week on
the market," said Laura Barnett, a real estate agent with RE/MAX DFW
Associates in the Dallas area. "But I may be more aggressive than most.
Usually just in $5,000 to $10,000 reductions for the most part."
Barnett said she rarely had to drop prices in the last few
years because the Dallas market was just that hot. Instead, the norm was
multiple offers and sale prices above ask.
"But there is a strange change that is in the air, and
sellers are starting to have to humble a bit. I would not say it is a buyer's
market, but a new balance between buyers and sellers has been hitting us since
August," Barnett said.
"Sellers are
starting to have to humble a bit." -Laura Barnett, Dallas-area real estate
agent
That may be because home prices have hit a tipping point in
affordability. There is only so much buyers can handle after a multiyear run-up
in prices. Of course, every market is different, and some markets may have
overheated, while others are still competitive.
The average time on the market for all homes nationally was
34 days in September, according to the National Association of Realtors. That
is down from 39 days in September 2016. But markets like Seattle and Denver are
still seeing homes sell in just a few weeks.
It would be easy to say that all you need to do is price
your house correctly and competitively in the first place, and then you won't
have any problems, but there are several schools of thought on when to be
competitive and when to test the market.
"I don't believe in 'testing the market,' but … if we
enter the market that might be pushing the top of the range, we can easily
gauge response within seven to 10 days," said Dana Rice, a real estate
agent with Compass in the Washington, D.C., area.
"It's almost a certainty that if we don't get an offer
within that first 10-day period, then we've missed the mark," she added.
If the home doesn't sell in two weeks, Rice said, she then
considers a price cut.
"And we've had a lot of success doing a rapid price
adjustment and bringing those same buyers back — the ones who liked the
property in the first place who will view the price adjustment as 'the seller
is listening to me,' and most buyers want to feel that the seller is listening
to them," she said.
It can also be beneficial to reach out to people who may
have toured the home first and let them know that there may be a price cut
coming. The buyer may make an offer that is slightly above your intended cut.
What sellers should do
If you and/or your agent are considering a price cut, first
research your neighborhood, right down to the ZIP code, to see how long it
takes most homes to sell. Then look at homes that sold after a price cut.
"From your research, calculate the average price
reduction of pending sales in your ZIP code over the previous three to six
months. Get a rough idea of how much you will have to lower your price,"
advises Steve Cook, editor of Real Estate Economy Watch.
"Then compare your rough final price with current
listings in your market. Find the average of those homes and reduce your rough
price by the list-to-price ratio to get a price that will beat the
competition," he said.
Once a price is reduced, all listing websites will be able
to see that, and some will send an alert to buyers. Real estate agents will
also market a price reduction, both on the front-yard sign and the online
listing.
While a price drop can bring in more buyers, it can also
turn off some buyers who might have been on the fence, fearing that the home is
not as desirable as they thought.
Cook recommends that if you don't need to sell quickly, you
might consider taking the home off the market for a few months and then
relisting at a lower price.
"Your listing will look like a new listing, and you
will avoid the stigma of the price reduction," said Cook.
