If you haven’t been living under a rock, you may have heard that interest rates are rising, causing the market to slow down significantly compared to recent years. In addition to rising rates, we are also moving into winter months, which historically yield lower property transaction numbers. All of this can be a little disheartening for sellers, especially since this time a year ago they were experiencing multiple offers, many of which were over asking price. It is important to remember that there is a reason for rising interest rates: to bring down inflation. And inflation has grown astronomically recently, so our interest rates have, too. Rather than focusing on what you could’ve gotten for your home in 2021, or thinking that value is equivalent to your home value now, consider reframing your mindset. When listing a home, you want to have an understanding of the market so you can determine a competitive listing price. Although it seems daunting to sellers, price reductions are becoming more and more common, and if you base your list price and reductions on a firm understanding of the market, you can be sure that you will get the most equity out of your home sale.
So, when do you reduce your listing price and by how much? When listing your home, start a little high ( a little meaning anywhere between $5,000-$10,000 over market value). If there is a cash buyer to meet this demand, then great! If not, then your first reduction will be about getting a little closer to market value. Move the price down in small increments, somewhere between $2,000-$5,000 at a time. A good rule of thumb would be to reevaluate the buyer activity you’ve seen around your listing every 2 weeks or so. Are you getting a lot of showings or none at all? If the former, drop it by $2,000. If the latter, drop it by $5,000, maybe. The buyers behavior will tell you what they think of the price. You just have to listen!
There is no hard and fast rule for price reductions on homes, but with the right realtor as a guide, you will still earn the equity you wanted from your home sale.