Price Reduction... How soon?

Question

How long will you guys let a house marinate in this market before you'll do a reduction? Do you have a plan or system that has shown any sort of results?
I have a really nice rehab - best for sale in the neighborhood, it is priced right in line for the neighborhood but getting no action
comps run 109k to 131k in last 4 mos. I am at 123900. I think if I can just get some traffic I'll get an offer, is a price reduction the way to go or do any of you hav any other suggestions?

Many Thanks

Chris

Peter Giardini · Answer

It is all about traffic. If you are not getting traffic you are priced too high. Don't kid yourself... It doesn't matter how nice the property is, unless buyers walk through it, they are telling you they don't see the value relative to the price. Also keep in mind we are about to experience a real game changer come April 30th... with the expiration of the tax credit. Unless you want to find yourself chasing your price to the bottom... you may want to make the needed adjustments, take your profits and move on to the next deal. Best of luck!

J Scott · Answer

This decision is going to depend on your personal business philosophy and your need to sell... Personally, I don't like to drop the price EVER, but that means listing at the lower end of the market or below market value right from the start. For me, the ideal situation is to sell quickly (no more than a couple weeks), and I'm willing to give up some profit to do so. For others, they want to derive every last penny of profit from the deal, and are willing to let the property sit until the right buyer comes along. Both philosophies are equally valid based upon the goals of the specific investor and the specific investment. There's no right answer. But here are some questions to ask yourself: What is your motivation to sell? Do you need the money right now or can you wait? Do you think the market is going to change (up or down) in the near future? Can your property appraise for what you want to sell it for? Will it still be able to appraise in 3 months as old comps expire? Are there lots of run down houses in the area that could get sold as REOs in the near future, potentially hurting your value?

J Scott · Answer

Both great points! As for traffic, I've seen some houses that get lots of traffic, but no offers. Good rule of thumb (in my opinion) is if you have 15 showings and receive no offers, you're probably priced too high for the market. That doesn't mean you won't find a buyer at that price, just that buyers won't be plentiful at that price. And yes, things will definitely change on April 30. We stopped buying back in February (with one exception) and are looking to have all our inventory under contract to sell by the end of the month. I expect REO prices to drop come May (no competition from owner occupants), and buyer demand to dry up in many parts of the country. On the bright side, if you can buy REALLY cheap in May/June, you should still be able to make money reselling. But, if you've already bought a rehab project, you should your best to get rid of it by April 30.

Matt Mathews · Answer

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Chris Reilly · Answer

It sounds like you are priced reasonably well, at least inasmuch as you should have seen some foot traffic by now. Check on your agent's marketing efforts again. You stated that the person is "an experienced agent who works for mainly investors"? Well, none of that client base is going to be buying your fully-rehabbed home. So who else are they driving into the sale offering? Also, make sure that your MLS listing details are correct. You wouldn't believe the mistakes I've seen there --- and they impact large.

Christopher Davis · Answer

Thanks guys, I'm not in a must sell quick senario and there is good flexibility in the pricing,but I definitely want it under contract by4/30. As several of you alluded to traffic is the key,so I'll probably start ticking down the price and see what the market likes. Chris

Mike V. · Answer

If I have 20 showings and no offers I lower the price, if it has been 30 days and no offers I lower the price and if I have been getting a lot (>50%)of "price too high" feedback I reduce. I usually reduce in 5 or 10K increments based on how bad I need/want to get it sold. I was very agressive on my last two just to make sure I got in under the April 30 deadline.

Don Konipol · Answer

I lower my price when I am convinced no one will pay my asking price within the next 60 days

Christopher Davis · Answer

Jon, The 109k houses are not updated,fresh rehabs. The 130k houses are a couple hundred sq feet bigger some have garages and are rehabbed. This might explain the price range. The quality of my rehab exceeds all others I have seen in the neighborhood.That is what is different. I am priced in the low 120's and still nicer than the high comps. Yes it is well marketed by an experienced agent who works for mainly investors. The neighborhood is common for the area, mostly racially mixed ,working families 2 kids 2 cars 2 incomes friendly folks. Really just wanted to see what rule of thunb others may use and what motivates them to lower price , Profit DOM Seasonal Sort of what Jason said at the end of his post Thanks all Chris

Jon Holdman · Answer

If you have comps at $109, how is yours in line at $124K? Sounds like you're priced at the high end of your neighborhood. $109K to $131K is a pretty big range. What's different about those properties and yours? You want to be priced to be the best deal in the neighborhood right off the bat. If you're getting no traffic, does that mean there's a problem with your marketing? Its on the MLS, right? Sign in the yard? Flyers to the neighbors? Is there any traffic at all? How does your property compare to other current listings in the neighborhood? How does your neighborhood compare to similar, nearby neighborhoods?