Musings on 'lower the price' advice

weedyacresAugust 15, 2011

I've been hanging around this forum for a while and see a recurring theme. Someone will post "why is my home not selling," and people will invariably chime in "lower the price." "If it's not selling the market is speaking." "The feedback isn't about price, it's about something else, but what they mean is your price is too high for this defect."

It's all about price, price, and more price.

So here's my thought. While I agree that any house will sell if the price is low enough, sometimes the rejection really isn't about price. It's about the house, and not necessarily some incurable defect. I may only want a house with a downstairs master. Or a 3-car garage. Or a pool. Or not a pool. Or a flat/sloped up/sloped down/sunny/shady back yard. And if these things are on my must-have list, I'm going to reject a house if it doesn't have them all, no matter what the price is. (The exception being if it's so drastically cheap I can fill in the pool or regrade the backyard, which isn't likely.) But someone else wants the opposite of me and will buy it.

Difference in taste or desire does not necessarily equate to defect.

I have a friend with a house on a pond. Someone crossed it off their list because they were worried about their young children wandering off and falling in the water. Another friend had a house with a driveway that wound around and down to their somewhat secluded house. Some people didn't like the driveway, while it was a positive feature for them when they bought it.

But in all these cases, you just need to wait for the buyer who loves the pond out back, or appreciates the seclusion, or prefers the master to be upstairs with the rest of the rooms, or likes the sunny backyard. A lower price won't convince the people who don't like that feature to buy it, and it's not necessary to attract those who do like that feature.

If there's something that's a near-universal negative, like a busy street, or outdated finishes, or ratty carpet, then yes, you need to drop the price to get it sold to someone who wants to remodel or is willing to trade off street noise for more square footage. But if it's just something that's personal preference, then hold tight and wait for the buyer with the same tastes as you. Assuming, of course, that you've got the comps right.

Your thoughts?

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I completely agree.

    Bookmark   August 15, 2011 at 10:39PM
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I agree as well. Someone with a ranch was posting a while back. A ranch on acreage will take a while to sell.

We were considering buying a home with a main floor master, which is not the norm in our area. Our realtor said it would take longer to sell, but that it would sell for more PSF. Ironic, huh?

    Bookmark   August 16, 2011 at 12:47AM
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Well, I agree to a point, but only to a point. And I was in that situation not long ago. We had a very nice house on a couple of acres with a guest house and a pool which did not have a breakfast room even though it was a 4500 SF house. Buyers who didn't care about the acreage or the guest house didn't like it because of the lack of a breakfast room. We needed a buyer who did care about the things we did have. However, at our original price point there weren't a lot of buyers in that price range. And, while waiting for that buyer, we had to keep paying the carrying costs to continue to own the house (mortgage, maintenance costs, utility costs, taxes, etc.).

We took the house off the market for a few months, relisted it (at $100k less than our original listing price) and had an offer in 3 days. Now, it is true that our ultimate buyer was someone who liked the features that our house did have. So maybe that buyer would have bought it listed at $100k or $50k higher. On the other hand, we had reduced to a point where there were more buyers. Would that buyer had ever seen it when it was priced at the higher price? Also the buyer didn't like some things and intended to make some modifications. Could that buyer have afforded those modifications if the house price was greater?

And all that time you are waiting to sell you are spending money to own the house. It cost us $5k to $6k a month to own that house. If it cost another full year to sell for $50k more then we would have lost money on getting that $50k.

You have to consider the overall costs involved in owning and selling the house which includes how much it costs to continue owning the house while holding out for the higher price. And, that doesn't always work either. The house across the street took 3 years to sell and ultimately sold for almost $300k less than the original listing price.

    Bookmark   August 16, 2011 at 7:39AM
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True to a point... The problem here is that most of these posters who are asking why they have no offers are also saying that they want an offer NOW. The only way to do that is to lower the price.

    Bookmark   August 16, 2011 at 7:48AM
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I'll be the first to disagree.

It is about price. It is always about price. That is the fundamental law about selling anything in a free market.

If 1 potential buyer doesn't think your house is worth what you are asking for it, then that is a matter of taste. If 50 potential buyers over a six month period don't think your house is worth what you are asking for it, then it is a matter of price.

While it is possible to wait for a cash/mostly cash buyer who will overpay for a property, that is a horrible strategy for the vast majority of sellers. The usual result is that you run up big carrying costs and then end up having to lower the price later anyway.

The only thing I would agree with is "Assuming, of course, that you've got the comps right. " Most of the posters who get the "lower your price" speech have the comps wrong. They list all the properties in their neighborhood that AREN'T selling and rationalize away the ones that do as distressed or inferior in some way. Owners who price appropriately from the start are posting threads about how they haven't had an offer in 6 months.

    Bookmark   August 16, 2011 at 8:21AM
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Interesting question Weedy. I agree to a point as well. The lower the price is, the more likely a buyer will overlook his tastes. I'm house hunting as well. I want an old house on acreage. But I take notice when I run across a newer ranch house that's cheap and I consider it. I even consider less acreage though I really, really want a certain amount because I have horses. But I do look at everything and weigh out all the pros and cons. Also, the lower the price, the larger the pool of buyers. On the selling end, I'm in a situation like Kats_meow was. I have a very unique property in that it's a horse farm and part of the value is the horse facilities. So I really need to find someone who has horses, who wants this kind of house or will overlook her tastes, who wants to live in this area, etc. If it's cheap enough, maybe someone will consider it like I'd consider that newer ranch house. But what's cheap? I think part of the problem today is knowing how long to wait. In the old days, if your house didn't sell in two months you knew something was wrong. Are you overpriced because it didn't sell in two months? Six months? One year? How often can you expect to wait for serious buyers to pop up if you have a cookie cutter house? How long can you expect to wait for serious buyers to pop up if you have something that's unusual? Maybe if you sell it in six months, that is fast! Maybe it's not. Certain types of houses sell faster or slower and of course houses in different areas sell faster or slower. So maybe that's the question. How long is it taking for similar houses in the same area to sell?

    Bookmark   August 16, 2011 at 11:56AM
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"The exception being if it's so drastically cheap I can fill in the pool or regrade the backyard, which isn't likely."

In other words, it IS about the price. If a property next to an airport noise buyout zone comes on the market at 200K, it most likely will sit there. Just outside the zone is still most likely to be too noisy for most. But, at 50K, someone---lots of someones, will compete to buy it. It's cheap enough to overlook it's incurable defect.

If someone needs to sell, then reduce the price until it's an attractive property to a wider audience. That WILL get it sold. If you don't have to sell, why even put it on the market in this climate?

    Bookmark   August 16, 2011 at 10:39PM
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"Difference in taste or desire does not necessarily equate to defect."

And if you have a 'different' property expect fewer buyers to be interested lowering demand and the price you can get.

No matter what you may want to think, it is mostly about location and price.

    Bookmark   August 17, 2011 at 8:40AM
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location and price are the two main drivers. However, certian areas with different stock of houses can have more unique circumstances. Especially true when you're at the higher end of the price spectrium for a particular area.

in my town, we had a very tastefully renovated house that was done with high end materials that far exceeded the normal for new or existing construction in the area. However, the layout was a little different, it wasn't bad, just not the open floor plan that seems to be everywhere. they did come down on price from the origonal listing. However it sat for 6-9 months at its last list price and sold for list. It was a situation where the house probably deserved the price, but not every buyer loved the layout, it took finding the right buyer who appreciated the materials and space (and could pay for it) but was looking for a more traditonal layout than the limited new construction in the area.

Same thing with larger older homes that need work.

in your basic subdivision with your basic normal house, it comes down to location and price. more unique circumstances have some other factors involved on top of the first 2.

Yes, more unique things limit the buyer pool and in theory demand. However, the supply and demand curve on real estate is not as elastic as other goods. you don't have to appeal to 75%+ of the population to sell your house, you don't have 100 of them to sell.

I guess all I'm saying is that you shouldn't think that a person needs to discount the more unique house enough to get someone who has no need or want for the unique item, or thinks that its a negitive, to buy the house.

    Bookmark   August 17, 2011 at 11:55AM
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weedy, I agree with your thoughts. In our case, the only "negative" thing anyone has said is that they want an "open concept lay-out" and ours is not....and in this buyer's market, they can afford to be picky and find one that is in the newer homes in this town....but they were just threw up quickly and covered with sheetrock to "look pretty"....but the buyers don't know....but the ones of us who watched the mass construction, when they thought the military was coming back from Iraq, know how terrible they were built....and of course the realtors want a sale, so they are not about to tell them.

In our case, DH is an architect and drew our plans to suit our taste and his crew built it, so we know it was built well and what materials are in the construction.

    Bookmark   August 17, 2011 at 2:06PM
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I'm not saying price isn't important. It absolutely is. You've GOT to price it right, based on comps. That goes without saying. I also agree that the more you lower the price (below the comps), the larger your potential buyer pool, both because it's in the price range of more people and because more people would be willing to compromise on their wish list because it's such a great deal.

In addition, if you've got a unique feature that not everyone values (MIL quarters, pole barn, acreage, pool) but that are genuine value-raisers in any appraiser's book, you can either wait until someone comes along who values that extra and is thus willing to pay for it, or discount that from the price so that those unwilling to pay extra for it get it "free."

So if you need/want to sell it fast, lowering the price will increase the probability of doing that. The lower the price higher the demand, the quicker the sale. Econ 101.

But below-comp price is not necessary to sell a house, or sell a house quickly. Sometimes you get lucky and you have the perfect house for the first buyer that walks through the door. Or you wait for 50 people to traipse through until one has a wish list that matches your house's attributes.

So while lowering the price can and will sell a home, it's not always the only way to do so.

    Bookmark   August 17, 2011 at 2:06PM
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"in my town, we had a very tastefully renovated house that was done with high end materials that far exceeded the normal for new or existing construction in the area."

While iverimproved may please whomever did the alterations, you are very unlikely to recover the money spent.

Appraisers will/can only go so far in adjusting for "high end materials."

While you may find a willing buyer, the bank is worried about what THEY will have to do to find a buyer if a default occurs.

Having the most expensive house in the neighborhood is always harder.

All the other properties temper the perceived value, to buyers and lenders.

    Bookmark   August 19, 2011 at 9:20AM
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Many buyers won't pay more for 'solid construction'. They don't know the difference, and they don't CARE. How do you think all those McMansions got the boonies?

Years ago when I pointed out to our listing agent that we'd replaced every (1950's aluminum) window in our house, she smiled kindly and said, "Buyers don't care. They see 'windows'; houses have 'em."

From some of the posts here, I'm thinking that if you have a home that is unique in some large respects, you'd better start stockpiling names of people who'd buy your house the day you move into it. (Not a bad strategy to invoke BEFORE you buy, huh?) 'Unique' probably should cost you LESS, not more, because you will wait forever for the 'right' buyer or sell for less to the existing market.

    Bookmark   August 19, 2011 at 2:11PM
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We recently listed and I asked for advice for advice about pricing because of a short sale listing at the top of our street. Our realtor wanted to start us almost $90,000 more than the current price of the short sale. The general consensus of the forum was to list much lower. Our realty team was confident at the price they suggested so we trusted them. We had a showing the first day on the market and then an offer the following day. Had more showings the next day and then a second offer at full price. We are in contract and through inspections and still have people stop us when we we are outside to tell us they love our house and give us their name if our deal doesn't make it to closing. So, if you have a good product you can sell your house in this market, not just give it away. I guess my point is there did seem to be a knee jerk reaction of "lower the price" from many people based solely on one short sale. It is probably best to listen to the experts who know your specific market when deciding what to list at and when and if to lower.

    Bookmark   August 20, 2011 at 8:09AM
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