Price reductions escalate in today's housing market

How to tell if you're asking too much
By: Dian Hymer: Inman News
In March, a home seller in Oakland, Calif., put his home on the market and listed it for $925,000, which was above the price his agent recommended. The house, a charming Mediterranean, was newly painted inside and out. It was decorator perfect.

The listing was well received at the agent and public open houses. But, at the end of the first week on the market, the listing agent hadn't received a single inquiry.

The listing was located in a desirable neighborhood. It showed well. And it had a lovely setting. Furthermore, well-priced listings in the area were still selling quickly.

Although the listing was relatively new on the market, the listing agent recommended that the seller reduce the asking price to $875,000. The seller agreed. Within the next week the showing activity picked up dramatically. Three offers were made and the listing sold for over $900,000.

In this case, it was easy to figure out that the listing was priced too high for the market. When listings like yours are selling and yours isn't, it's usually because of the price.

A home seller in Rocklin, Calif., put her house on the market at the beginning of April. During the first three weeks on the market, only one buyer came to see the house. On the surface, it might appear that the price was too high. But, the seeming lack of interest might have been due to local market conditions.

Unlike the Oakland property that is located in a relatively low-inventory market, Rocklin is a high-inventory market. This means there is more competition from other sellers. Buyers have more listings to choose from, so they can afford to be picky.

HOME SELLER TIP: To determine whether your home is priced right in a high-inventory market requires a bit of investigation. First, make sure that your listing has been properly exposed to the market. Minimally, it should be on the Multiple Listing Service (MLS), on the Internet with a photo tour, and it should be held open for local real estate agents.

Then find out how many homes like yours are on the market in your area. Ask your agent to call the listing agents who are handling your competitor's listings to find out if these homes are being shown and how frequently. Have any of the listing like yours sold since you put your home on the market? In general, how long is it taking to sell homes like yours? Then take a good look at the price of your home in relationship to the competition.

If there haven't been any recent sales and listings are taking months to sell, you may need to adjust your expectations about how long it will take to sell your home. However, if other listings are selling, or are at least being actively shown, and your list price is higher than the others, lower your price.

The time to make a price adjustment is when you discover that it's too high, even if this is soon after the property is listed. Staying on the market too long at a high price is risky. If the market softens further, you could end up having to make a bigger price adjustment later.

A minor price reduction is likely to result in a modest response. In order to make a positive impact, reduce your list price enough so that your list price is at or below the level of your competitors whose listings are being shown and sold.

THE CLOSING: If your home has an incurable defect, like a location on a busy street, you might need to make a bigger price concession. In a low-inventory market, buyers will overlook such defects. In a high-inventory market, they are less forgiving.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers," and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.