How much to reduce?

kats_meowAugust 10, 2010

I've posted in another thread from a few months ago but think this is really a separate thread now. House has been on market almost 4 months. We have had one price reduction from $600k to $565k (where we are this is fairly high end). It is hard to determine comps because these are custom houses on acreage so acreage varies from about 1 acre to 6 acres.

We have had 16 showings (and had 2 others that we had to cancel). Have had 3 people express serious interest but no offers. We need to sell quickly. I've been told this is a good activity for our price range in this area. Back when we bought (when the market was good 4 years ago) I was told that houses in this subdivision usually take a year to sell. I've seen a lot of variability in that over the years.

We are considering dropping to around $537 to 538k.

Since the beginning of the year within the general area (of course some people may buy farther away) there have been 7 sales (3 within the last 3 months - I saw no significant difference between these and the earlier sales). One sale I don't have enough information on.

The CMA on the surface says average DOM is 79 days and houses sell for 93% of listing price. However, I asked to sell the listing history on the sold houses and the ones that are active.

I found out the CMA doesn't really tell the story. For the 6 houses I have detailed info on, they sold for 84% of original listing price. Average total DOM was 455 days! One house was on the market over 1200 days. If you take it out the average is still close to 300 days. One house sold during its initial listing (57 days) and sold for 91% of initial listing price. Another sold after 4 1/2 months for full listing price.

If we lower the price to around $538 we have reduced about 10%. That is fine but I am a little disconcerted that most of the houses (with the exception of the full price) all seem to sell for about 9 to 12% below the final listing price. I am somewhat concerned about reducing it and then having buyers expecting to get another 10% off (that said I don't think we started as high as some of these houses started a year or two ago when the market wasn't as bad).

There is one pending sale on a house that is at about 91% of listing price, don't know what it sold for.

Of the active listings, the average DOM is 278 days (not counting our house). The average price reduction has been about 7% but some houses have had no reduction and a couple have had 30% or so reductions. Most of the ones with no reductions are newer listings (less than 3 months) but one has been listed almost a year (don't really get that one). A few have had token (less than 5% reductions). In general the longer the house has been on the market the greater the reductions. If we reduce to 10% off our original listing price we will be the only house with that much of a reduction that hasn't been listed for over a year.

It is clear that it usually takes a long time for these houses to sell. I want to break the odds and sell before a year. I am still thinking after seeing this to reduce to around $538k. Any thoughts based on this?

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Hi, I'm not sure how you came up with the odd figure of $537-8, even taking into account that you have a 'final' price in mind that you want to recoup, but if you really do want to sell and be done with it, I would go for something more definitive, and stick to that (apart from whatever might need negotiating after inspection on a serious offer), something like $524,999. or even $499,000. You must have something nice to sell if you've gotten the interest that you have, but in today's market (or any market) it's all about price and those lookers apparently thought they could do better. Frustrating, I'm very sure, but it's the same story as always - price it low (enough) and you'll sell. Just lowering it "some" (for the second time) is not definitive and will prolong your anxiety and ongoing payments.

    Bookmark   August 11, 2010 at 5:35AM
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How I cam up with the $537-8 was in another thread. I was originally going to reduce to $550 so we would be in the search bracket for $550 to $560 and for $500 to $550 which is how the brackets work for our MLS but with the possibility of reducing to $25k after 30 days or so. Someone else suggested just going ahead and splitting the difference between the $550 and $525. Since that is about a 10% reduction from the original listing price on thinking about it that sounded like a good idea.

I am hopeful that reducing it to that range is enough. We've had two recent people look at it who have interest.

Looking at how this house compared to the houses that sold we are much more attractive than thoese sell in the $500k range. The property itself is very attractive and in a very desirable location. Also, we have a nice guest house. Most of the comps do not. I think one reason we've had so much interest is because of the guest house.

Most of the houses that reduced 15 or 20% were houses originally listed in 2008 or 2009 where I don't think that people really realized what the market was like (we actually don't have as bad a market here as at many areas -- this was never a bubble area. Even in good times houses in this area take a long time to sell though given they are high end with acreage). In our case, we actually tried to list at a reasonble price to begin with (obviously not low enoough but well below what we would have listed at a year or so ago).

I think that given the activity that this reduction will be enough but obviously could be wrong.

    Bookmark   August 11, 2010 at 11:30AM
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What is the feedback from your realtor? Did the buyers who saw your house buy something else? Why didn't they offer on your house?

You can get lost in 'percentages' and DOM. What is selling and for how much per square foot? Try to adjust for differing lot sizes as part of the sold prices.

A recent NY Times article says the lower-priced market is almost finished washing out the short sales and foreclosures, but the mid- and upper-priced market is now right in the mess. If people are moving into your area, they may have had to sell for less, even if your town didn't see the bubble. (Is there really *anywhere* that did not? LOL)

    Bookmark   August 11, 2010 at 12:41PM
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There have been a variety of reasons for no offers. Some didn't like the floorplan. The kitchen is a bit smaller than most houses in this size/price range. There is no separate breakfast room (there is a breakfast bar we put in). There was one where we were supposedly top of list after two showings but found out after third showing that the wife didn't see the house until the third showing and she nixed it due to kitchen.

There were 3 reports of a pet odor in the house. This is an issue that we battled for months (spending huge amounts of money to try to fix...ultimately got ducts cleaned and some other stuff and seems to be gone now). Also pets are no longer in the home. (Although some of this may be perception. We got one report of a dog odor in the house. However, dogs don't come in house -- only had cats in the house. But they saw dog paraphernalia outside).

In any event, I think that issue is now resolved.

We had a buyer who has seen the house twice and this is supposedly the only house they are interested in. But they want to sell their house first (I have the idea they don't have to but I think they are sort of waiting around. That said, they could find a different house tomorrow).

Another recent showing says they like it a lot and will come back for another showing but hasn't yet.

Plusses of the house are a very attractive lot in a great location, and a guest house and 2 garages. House has a pool which is a plus in this area but pool is sort of plain so not that much of a plus. House has new kitchen appliances, new paint, new carpet. A couple of realtors at an open house were critical of two different colors of downstairs tile and the fact master bedroom is slate tile. However, this has not been mentioned in any buyer feedback. House has been staged and feedback on appearance and condition has been very good.

I think that one of the houses that sold recently was shown (going by who agent was for buyer that bought and looking at who showed our house). If this feedback related to this buyer it was that the house showed well but buyer thought it was a little small for what they wanted (our house is about 4500 square feet with guest house and 2 garages) and that they didn't like pool area (didn't say why).

Average price per square foot for sold houses is about $114. That is without considering the fact that acreage varies from 1 to 5 acres. We are currently lited at $126 with average per listing is $132. Bear in mind that we have a guest house which isn't reflected in the square footage of the house (that is the $126 is just looking at main house square footage).

    Bookmark   August 11, 2010 at 2:14PM
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Just remember that however attractive the house is to YOU, or however much you put into it over time, it's only going to be as attractive to someone else as they think it is, and right now the lower the price, the more attractive it will be. Don't forget they may be doing a lot of adding up (beyond what they pay for the place) of how much their changes will come to, the ones they want to make the place work for them, so don't assume your house (neutral as you may have made it) is necessarily everyone's taste. Not much fun, but the way things are.

    Bookmark   August 11, 2010 at 3:01PM
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Reduce it to below the $114 per square foot if you want to sell now. You don't have the luxury of time on your side. Otherwise you'll be one of the 300+ DOM ones.

    Bookmark   August 11, 2010 at 5:07PM
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The $114 per square foot is an average with a huge amount of variation in the range due to age, amenities and conditions. Because there are few sales close to this price range realtor ran comps in range from $400 to $600k. The two sales in the low $400s are not as comparable. If you look at the 3 houses in the middle (closest to our range) the average is $121.

Also the comps include houses without guest houses or quarters. To just take the average of $114 is basically giving no weight at all to the guest house.

The 7 sales breakdown (from least to most expensive)

$114 SF - about 2.75 acres, newer house, pool, no guest house or quarters

$100 SF - About 2.8 acres, much older house, has guest house and pool but not very comparable otherwise to our house

[the above 2 houses sold in the low 400s, are smaller and one fewer bedroom, they are not really very comparable]

$128 SF - 1 acre - newer house - no pool or guest house or quarters (sold for full price)

$103 SF - 1.5 acres - pool, no guest house or quarters (this house was listed for over 1200 days)

$133 SF - 5 acres - somewhat older house, pool and quarters,

[the 3 houses above all sold in the range from $500 to $530]

$117 SF - 1 acre - newer house - pool, no guest house or quarters

$105 - 2.8 acres - pool, no guest house or quarters.

[Those 2 houses sold from $565 to $600k]
We have 2 acres, guest house, pool, 2 garages.

    Bookmark   August 11, 2010 at 6:12PM
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Kat's meow I can sympathize with the stress and uncertainty of your situation.

We just sold our house in June and we had to sell as we were building another one.

The realtor's suggested asking price did make me sad as it was much less than I felt it was worth as I knew what upgrades we had done.

The harsh reality is that producing theoretical, wishful numbers and expectations is meaningless. If you want to sell and have to, you will need to price lower than you feel that your house is worth, maybe significantly.

We sold to someone who saw it in the first week and had to sell their house first: certainly for less than I hoped, but the deed is done and I can move on with the new property

    Bookmark   August 12, 2010 at 1:44PM
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Oh, we are definitely going to reduce it. The only issue is how much.

    Bookmark   August 12, 2010 at 4:54PM
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What portion of selling price is for the land on your sold comps? You can't compare without first deducting the extent to which the lot contributed to the selling price. Is property in your area assessed with separate 'land' and 'improvement' values? Is there a general percentage: land to house? In my area the land is often of equal value to the house unless the house is on the upper end of the zoning maximum per acre (6000 sq ft.).

'New' sells. 'New-er' sells. Many buyers want a HOUSE, not a house, guest house, two garages and/or a pool. (Is the pool in great condition?) For some buyers, all those are not only not positives, but are negatives.

I couldn't consider a house where cats have lived. (Allergic.) Could the 'small/no eating area' kitchen be enlarged by a buyer without too much fuss?

Is your property in tip-top condition?

Something that's worked for me is to go to open houses on any comps. I get a feel for how my house stacks up.

    Bookmark   August 12, 2010 at 5:39PM
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Good luck figuring out how much the land is worth. It is difficult to know. Appraisal values around here don't usually bear a lot of relation to market value (market value is usually higher). That said the county values the land itself at about $52000 an acre so that puts our land value at about $104k.

Obviously this house is going to appeal the most to those buyers who affirmatively want a guest house (it is, in fact, the reason we bought this house in the first place). Most houses in the general area/price range have pools although some do not. The pool is fine and looks good but is plain. We expect that a buyer will be someone who wants the guest house (our agent says that is overall a plus for most buyers in this area).

Most people who would buy in this area would be likely to be people with pets or horses. That is the big attraction of these acreage homes. I'm sure there are some people who don't have pets or horses who buy in this area but that probably isn't the norm.

The kitchen could be enlarged as it is on the back wall of the house.

We spent quite a bit of money to get the house is really good condition before putting it on the market. We updated appliances, painted, recarpeted, put in new vanities in the baths. We refinished the wood floors. We have well maintained the house. The feedback we've received on condition/presentation of the house is very good.

The agent says we have been receiving very good traffic for houses in this area/price range.

    Bookmark   August 12, 2010 at 6:36PM
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Kats meow,
You have two items working against you... a floor plan that a lot of buyers consider awkward, and a small kitchen. Both are very costly to correct.
It does not matter how much traffic you have, if they all think there are other homes that offer more value than yours.

    Bookmark   August 12, 2010 at 7:06PM
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I cannot speak for wealthy people, but myself, if I had the money, a guest house would be more of a turn off than a turn-on. Obviously there are people out there that would buy your house, compared to others, because of the guest house. It would be an instant turn off to me and others too, though. It's one of those double edged swords. It's a very unique feature that people will either love or hate.

Some will think "wow this is awesome we've always wanted/needed this" and others will think "what a waste. I'm not paying to maintain something I don't need".

The basic thing people are trying to tell you is...people are buying nowadays if the *price is right*. Only your realtor can definitively tell you what she/he thinks the right price will be. The lower the price is, the better the chance the house will sell. There's no getting around it right now. It's a buyer's market. I bought a house last year and I basically massacred the seller. We looked at quite a few nice houses, but they were overpriced for the market and we passed. Several of those people now have reduced the prices drastically. Too bad for them it wasn't lower to begin with!

    Bookmark   August 12, 2010 at 8:35PM
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I do understand not everyone wants a guest house (or pool house or quarters -- however you want to use it). One of the reasons comps are so difficult around here is that almost all the houses have different features which some buyers may love and others won't. So, one house has stables while another has a 800 SF workshop while another has a guest house and this other one has a green house and so on. When we bought the house (in a good market) we learned that even then average time to sell was a year and I think that this uniqueness of each property was one reason.

And I do agree that the house has a kitchen that, while not small, is smaller than some houses have and it is a negative. The positive we have is that the secondary bedrooms and some of the other rooms are very large.

Regardless I do understand we need to lower the price. The point is always how much to lower it. We will pick something this weekend though and go with it and see what happens.

    Bookmark   August 12, 2010 at 9:34PM
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Only your realtor can definitively tell you what she/he thinks the right price will be.

She suggested lowering to $549,900 (note this was after I told her that I wanted to reduce it...she didn't suggest the reduction). She thinks it will sell in that range.

I think she may be right. However, she is more....sanguine than I am about the fact that it may take a long time to sell. Perhaps because houses in this area usually do even in good times. I am wanting to reduce below what she suggested in a hope to get a faster sale.

    Bookmark   August 12, 2010 at 9:39PM
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It sounds like you have an honest realtor. She'll make a commission only when the house sells, and her percentage of the higher price is negligible. Some would be pushing you to reduce more!

If you want to sell faster, it's all about price. How much must you make on the sale? Do you want to tack on a little 'wiggle room' to that number and get ON with your life?

    Bookmark   August 13, 2010 at 12:11PM
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Ditto all the above.

Only the OP knows how much she needs out of the deal but the asking price probably will have to be reduced to a figure that hurts and then some!

A savvy realtor who is realistic and brutally honest is your best source of info about the amount of the reduction in price.

Good luck cats meow. Many of us shared your pain recently

    Bookmark   August 13, 2010 at 12:32PM
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We aren't going to make anything on the sale. We are going to lower the price to $537,500. If we sold it for that we would be bringing money to closing.

When we put the house on the market we knew it could take awhile to sell (simply because houses like this do even in good markets). We figured we could be OK if it took 2 years to sell if we broke even at closing. Or, to put another way, we could afford to bring money to closing if we sold faster.

We were planning to downsize and bought a much much smaller house (much less expensive) with plans to remodel it. (Paid cash). Long story short -- remodeling isn't feasible and we will be demolishing to build another house on the land. So that is going to be more cost than we had originally expecting to have. We can handle that to a point (DH is retired so we have a finite amount of money). However, there is a limit as to how much money we can afford to bring to the table on this house.

I understand fully that none of that has anything to do with the market price of this house. There is a point, however, where we end up better off just keeping this house and not selling it (at least not for several years). The house is twice the size we want and so utilities costs and stuff are higher than with the downsized house.

I realize that you can sell any house if the price is low enough. However there is a point where we end up better off just keeping the house and not selling it. We are a long way from that point but we could get there.

Anyway, we will reduce it and see what happens.

    Bookmark   August 13, 2010 at 7:18PM
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You did good. I have a feeling you are now where you need to be... Make sure the agent sends out a notice to every buyer that has already viewed the house, in addition to a mass E - flyer to the entire agent population in your area.

If you are getting no showings and no offers... you are way overpriced.
If you are getting a few showings and no offers... you are still way overpriced.
If you are getting lots of showings but still no offers... you are close, but a bit overpriced.
If you are getting lots of showings and getting offers... you finally figured out the market value of your home.

This is a general way of looking at things, and some properties do not fit this bill, but for the most part, it rings true.

    Bookmark   August 13, 2010 at 8:27PM
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Oh, well, you must know I like to hear that you'll teardown and build new! LOL

I'm hoping this reduction will light a fire under some of your 'lookers'. Your realtor may be able to convey that this is IT, as far as reductions go -- that you are prepared to take it off the market and wait for a better market in the spring. (Whether that's true or not, it's a good gambit.)

    Bookmark   August 14, 2010 at 5:21PM
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