What does a price reduction mean from a home buyer's perspective?

Dear Dave,

We are actively shopping for a home. We have been looking for about 3 months now and just haven't found the right place for us. As we keep looking, we have noticed the price drop on a couple of the houses that we have looked at. What do you think it means if a house drops $10,000 in price? Would now be the time to go in and make an even lower offer on the house? Is it worth it to settle on a house that might not be exactly what we want, if we can get it for a really good deal?

There sure is a lot to consider when deciding to buy a house! Thanks for any feedback you could give us.

Jack and Stephanie, Grand Junction, CO

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Jack and Stephanie,

Shopping for a home can be painstaking sometimes and requires the patience of Job to find just the right home. It is great that you can afford to be patient and have the time to really look, however, sometimes you can start to overthink things and get caught up in a vicious cycle of “It’s just not quite right." Be careful not to get so caught up in finding the “perfect” house that you miss out on the “perfect” home! There is a significant difference between a house and a home.

Searching for any home is a process of give and take and I would say that there is never a “perfect” house, but there are “perfect” homes!! There will be sacrifices and knowing that everything will not be perfect from a house perspective might help open up some avenues to finding your perfect home. In some price ranges, mainly over $400,000 in our market, you can see price reductions as there is a bit more inventory in those upper price points. In the price ranges under $400,000, our market is still moving quite brisk. 

“Many times buyers interpret that a price reduction means a seller is desperate or there is a problem with the house. That is sometimes true, but typically it simply means that the seller is listening to what the market is saying.”

Many times buyers interpret that a price reduction means a seller is desperate or there is a problem with the house. That is sometimes true, but typically it simply means that the seller is listening to what the market is saying. I say it all the time, selling real estate is not rocket science! If a home is for sale and it is getting showings and no offers, the price is likely too high. If a home is for sale and is getting no showings either the marketing is bad or the price is too high. I will not get into all the reasons the price may be too high, as there are too many to list, but it is safe to say that if a house is a good deal there will always be someone there to buy it. Almost regardless of the market conditions. Price reductions are generally a sign that a seller is listening to what the market is saying, nothing more.

After a price reduction is a great time to make an offer, as generally price reductions open the door to a new pool of buyers and generate increased activity. Ultimately, when priced right, conditioned right and marketed right, any house will sell and being the first to make the offer increases your chances of getting it. After a price reduction, you may be met with some seller reluctance to reduce even further, however, if you don’t try you won’t know. Make the offer and see what happens. The worse that can happen is they say no. 

Your last question is a good one, should you settle if the deal is good enough? I always say that the house does not make the family, the family makes the house a home! If this is true then it does not matter in what or where you live. I am aware this is being overly simplistic so before you settle you have to ask yourself, “Can we truly be happy and at peace in this home?” If the answer is yes, then go for the good deal and you won’t look back. If the answer is no or I am not sure, then no deal is good enough or worth the risk! There is a lot to consider and it sounds like you are asking all the right questions. I bet you find the “right” home soon! 

Dave Kimbrough
The Kimbrough Team

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If Our Home Sold in One Week Was it Underpriced?

Dave,

We listed our home for sale about three weeks ago and it sold in the first week for what we were asking. I was elated, but my husband keeps saying “we sold it too cheap.” I keep telling him it was just the right buyer, but he says it was underpriced. If our home sold in the first week, does that mean that it was underpriced? Just curious of how you view this, as I am sure you have run across this very situation. 

Jackie, Grand Junction

P.S. I am happy we sold it quickly, even if we could have gotten a little more.

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Jackie,

I have run across this many times over the years and this is one of the real estate questions that is almost always debatable. There is no doubt that every time we sell something quickly that I ask myself the question, “Did we price it too cheap?” I am here to tell you that sometimes the answer is yes, sometimes the answer is no and sometimes the answer is impossible to know. I can absolutely tell you that just because it sold quickly, does NOT necessarily mean that you sold it too cheap. 

There are times that we have sold a property within the first few days with multiple offers and in that case the answer would be, more than likely, yes. If something sells that quickly, with multiple offers then you probably could have gotten more money for it, because there are multiple people vying for the same product. The good news is that most of the time in multiple offer situations, we are able to get more than asking price. It usually works out to be about the same as it would have brought if priced higher originally. I really do believe that most of the time you are correct, it is just the right buyer and not because it was underpriced.  

“I don’t think a day goes by that I don’t tell one of my customers, “There’s a butt for every saddle, we just have to find the right butt!” A little talked about fact, which I might point out is underappreciated, is that there is always a school of buyers in the market and they are circling, just like fish in a pond.”

I don’t think a day goes by that I don’t tell one of my customers, “There’s a butt for every saddle, we just have to find the right butt!” A little talked about fact, which I might point out is underappreciated, is that there is always a school of buyers in the market and they are circling, just like fish in a pond. When new bait is thrown in, they all swim over to check it out and either take it or wait for something better. In our current market, there are more buyers than one would think. They are circling and waiting for just the right bait. When they see it, they will strike, but only if the price is right. Today’s buyers are not dumb, anything but. They are very smart and well educated on the market. When a property of interest comes up but is not priced appropriately, it will sit.  

I say it all the time, houses are like any other good to be sold. At a certain price all homes will sell and sell quickly, but the tricky part is establishing the market value for each one when no two are the same. That makes establishing a top of market value much more difficult than one might think. It is much easier to establish a market value for a particular item when there are thousands to be sold and they are all identical. In that case, it is simply the law of supply and demand, but when EVERY item is different with its own characteristics, good and bad, it becomes much more difficult. Even the same house in the same neighborhood has a different lot, view, finishes, condition etc. As you can see every house is different.

Honestly, sometimes I get it just right, sometimes I set the price too high and sometimes too low, but every time it is based on comparable sales in the area and my professional assessment of the unique values the property offers and I am sure your agent did the same. It really is as much art as it is science and you do not get them all right. If your home had not sold in the first week and been 60 days and no offer, your husband would have said it was priced too high. My best advice would be to be thankful it is sold, remind him that he agreed to the sales price and be thankful you can avoid the countless showings and constant cleaning! The bottom line is, it is sold and that is a good thing. 

Dave Kimbrough
The Kimbrough Team

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