Price Reductions: A Realtor's Take

Cheaper -- Not Necessarily Cheap

In a recession, everyone's looking for a sale. So it stands to reason that a home that has just had a big mark-down is a deal, right?

Not necessarily.

Simply knowing that a home that used to be "X" is now $10,000 less -- or $50,000 -- really tells you nothing, for the obvious reason that the original asking price may have been inflated. All you can confidently say is that the price is now "better" (in fact, the preferred Realtor term for a price cut is "price improvement").

In my experience, some of the homes touting the biggest price drops are precisely the ones that were most overpriced initially.

Looking for Patterns

So what does a price cut -- or series of them -- tell you?

Mainly, how motivated and realistic the Seller is.

A home that has been on MLS at the same price for 60 days-plus is almost certainly too high (the exception being an upper bracket home, which has a longer expected market time).

At that point, most serious Sellers will entertain anywhere from a 3% - 5% price cut.

If their home doesn't sell in the next 60 days, they'll take another price. Wash, rinse, repeat until sold.

So when you see a home sitting at 187 days with no price reduction, you know something's up.

Similarly, when you see a home that took a price cut at 60 days, and another at 120 days, and it's now at 179 days . . . you'd guess that an attentive Buyer is going to factor a third price cut into any offer they make.