When to lower house price?
November 7, 2016 12:17 PM   Subscribe

Trying to sell my house. The realtor is pushing to lower the price significantly. I'm pretty uncertain.

My house has been on the market for over 2 weeks. I'm in no hurry personally, but it's Minnesota, and house prices really take a nosedive in December and January as it's too cold out. Average days on market here is about 50.

About 20 people have toured the house, plus an open house that brought in maybe 10. No one has made any offers. A couple of the comments we got were pretty negative -- it's an old house and has its share of pretty serious problems, and it's on a busy commercial street which means it's definitely a niche house.

I already put a significant amount of time and money into staging, landscaping, carpeting, repainting, new light fixtures, and all the cosmetic stuff.

I listed it at $215K. Zillow has it at $221K. The realtor is pushing to lower the price to 199, which I could afford to do, but it would be a bit of a defeat to let the house go for that low. After fees and stuff I wouldn't be making much at all on the house after 8 years of ownership (bought after the crash, and the market is supposedly hot right now, so I'd expected to make a bit). What should I do?

If I really, really had to I could wait until the spring, but I don't want to be maintaining the property for that long.

In Minneapolis if it matters.
posted by miyabo to Home & Garden (23 answers total) 1 user marked this as a favorite
Does your realtor have comps to support their request?
posted by anastasiav at 12:19 PM on November 7, 2016 [7 favorites]

I do not know your agent or your situation, but on average, an agent's incentive is to underprice the home and sell it quickly.

For example, lowering the price from $215,000 to $199,000 would reduce the realtor's fee by about $500, or around 10 percent, from about $6,500 to $6,000 (assuming 3 percent commission). If, for example, that cuts the amount of time he has to spend by half, he should be happy to get a 10 percent lower commission. But it will reduce your income by about $15,000.
posted by Mr.Know-it-some at 12:30 PM on November 7, 2016 [12 favorites]

I have recently been in the market for a house (not in Minneapolis), and I have found Zillow's estimates to be too high in the majority of cases. I have found Redfin to be more accurately correlated to what houses that I've been looking at eventually sold for (I have been looking for some months, and have been tracking houses that I viewed, their listing prices, and then their sale prices to try to get a good sense of the market in my area). I'd check Redfin to see how they're pricing your house. I'd also try to get some recent comps from your realtor about sales in your neighborhood in the past month or so, to see whether you're in the ballpark. You might also want to run your own search on the major house search engines and see what is for sale in your neighborhood and the pricing: you can then compare your house's amenities and pricing to those. I would also do the math about how much extra it would cost you to maintain the house over the winter versus selling it for less now - heating it so that the pipes don't freeze, paying property taxes for half a year extra, etc.

I will also say that in the age of online house hunting, you may well get more interest at 199k than at 215k, because many potential buyers are likely capping their search at 200k, so your house may well not even be visible to them on Zillow, Realtor.com, Redfin, etc.
posted by ClaireBear at 12:31 PM on November 7, 2016 [7 favorites]

Response by poster: Comps are very tricky, since it's an old neighborhood with very varied housing stock, and inventory is extremely low this time of year. He is pointing to 2 specific houses, which are both at 210 and also haven't sold.
posted by miyabo at 12:41 PM on November 7, 2016

Response by poster: Redfin estimate is $213K.

Overall my feeling is that $215 is too high, and $199 is too low. Obviously the realtor just wants to sell quickly, but a difference of $5-10K is a huge deal for me.
posted by miyabo at 12:44 PM on November 7, 2016 [1 favorite]

Ideally when initially deciding on price, your realtor would have showed you various comps. However, I'll say that for the "busy street" issue, we live on a busy street. The street behind us (so our backyard neighbors) is not a busy street. Looking at the price of houses going up (I haven't followed up on actual selling prices), but there's a 10-20% price premium for houses of about the same size/quality for the quiet street. We had kids old enough to not play in traffic and valued the "more house" that we got for the same price.

I'll also note that we almost didn't buy our house; it was listed a bit above our max price range, and we felt like we were low-balling them (I think our offer was 91 or 92% of their asking price). They accepted our offer as they'd had the house up around 50 days in a <30 day average time/location. I'll note that 92% of your $215k (which I'm assuming is actually 214,X00 to get the optimal search results) is $198k; which is around what your agent is suggesting to move to.

Perhaps 14 days is a bit soon to lower the price, but if you haven't had a good discussion of comps, now's the time. Consider that the busy road may be a 10-20% difference with all-else-equal comps, as opposed to a "same price, but maybe wait longer" sort of difference.

Generally I was under the impression that after the cost of realtor and fees etc, that around 7 years was supposed to be the break even point in home owner ship. Obviously that equation will change depending upon how much one put down. Sometimes the market can be hot not because the prices are high, but because there's enough motivated sellers that the qualified buyers are happy to take the deal.

On preview; your agent should be able to have comps that have recently sold in addition to currently up for offer. If the houses that aren't selling at $210 aren't on busy streets that isn't super great for you. Do you know how long the current $210 houses have been up for? What makes your house that much better than the 210 houses? Have you seen them via open house?
posted by nobeagle at 12:54 PM on November 7, 2016 [3 favorites]

Response by poster: Another data point: if I find the ratio of house prices in 2008 to now in the neighborhood, we'd expect to sell for about 185. Then we'd want to list at 195. Maybe the realtor's on to something. I wish he'd share his work though.
posted by miyabo at 1:02 PM on November 7, 2016

If you are not in a hurry to sell and would regret selling for less than $200k, why are you even considering the suggestion?

As for the feedback, I found that the feedback I got when I sold my houses was pretty good feedback in terms of what those people thought. What I did not understand in your feedback is why the busy street was the issue. Presumably, before they went to see the house, they knew the price and the location and would not have even come to see it if being on a busy street was such a negative.

It sounds like you are not sure what to price it for and you do not trust the realtor to price it appropriately. I have no advice there other than the house is worth what someone is willing to pay.

If it were me, I would wait until after Thanksgiving to lower the price. Oddly, my neighbor had a lot of foot traffic on Thanksgiving weekend when he was selling his house. Lots of parents and adult children looking. He sold to a couple whose parents toured it alone first.
posted by AugustWest at 1:06 PM on November 7, 2016 [5 favorites]

"...it would be a bit of a defeat to let the house go for that low. After fees and stuff I wouldn't be making much at all on the house after 8 years of ownership"

That's not a useful way to think about this. Maybe you would have been better off if you could have sold it earlier, or if you'd paid less 8 years ago, or if the market was different, but that's water under the bridge at this point. So:

"If I really, really had to I could wait until the spring, but I don't want to be maintaining the property for that long."

That seems like a better way to think about it. Can you do a back-of-the-envelope calculation of the monthly costs associated with not selling, and then look at various scenarios? (Like, how much more would you have to get in the spring to make that a better deal than selling for $199 now?) Figuring out those costs may be complicated, though.
posted by floppyroofing at 1:17 PM on November 7, 2016 [10 favorites]

Ask for comps. Go to some open houses and check out your competition -- these are the houses buyers have to choose from and they'll be comparing your home's price and features to them. Consider the specific ways you'll be inconvenienced, and how much money you will lose by waiting till spring to sell. You really have a very narrow window to sell now, because once Thanksgiving week is here, very few people will see your place till after the first of the year.

Don't base your asking price on feelings -- I know it's hard not to. Most buyers are dreaming of a place that's in move-in condition, or else cheap enough to make the flaws easier to overlook.
posted by wryly at 1:31 PM on November 7, 2016 [1 favorite]

. . . it's an old house and has its share of pretty serious problems

Depending on the situation, these problems could of course have a major impact on the value. Are these structural concerns? Old boiler? Are your comps taking similar problems into account? Are any of the issues going to need to be addressed immediately? If so, a buyer would be more reluctant to take on a project this close to what's projected to be a hard winter.
posted by Think_Long at 1:38 PM on November 7, 2016 [1 favorite]

Depends where in Mpls you are. There are houses there for 1mil and $14k within a mile of each other...

Zillow is always way too high. And if it is an older with problems, there are lots of completely perfect houses that have been remodeled all over Mpls for that price...
posted by TinWhistle at 1:54 PM on November 7, 2016 [1 favorite]

Why don't you just ask your Realtor for his reasoning for the price drop? He should be able to explain it to you. If you want him to share his work -- ask him to share his work!

That many people coming through, with NO offers, in a market that is starved for inventory, signals to me that something is wrong. My suspicion is that your Realtor wants to get people who are searching for homes with an upper limit of 199k and then, obviously, hope to get them in a bidding war. I know everything thinks Realtors are just in it for a fast sale, but a good Realtor wants a happy client AND also makes more money if you sell the house for more money. It's in his best interest to get as much for you as possible, too. Have a sit down and let him try to convince you. If he DOESN'T have hard and fast reasons -- if he can't show his work -- get yerself a new Realtor.
posted by Countess Sandwich at 2:13 PM on November 7, 2016 [2 favorites]

Did you interview more than one listing agent? Are you in a contract of any kind with this one? If not, I'd suggest finding someone who will WORK for/with you to sell your house. If the agent isn't sharing comps, what else aren't they sharing? Sometimes, unscrupulous agents will get an unsuspecting seller to lower the price so they can sell to an investor friend...not saying yours is doing this, but the great agents (and they are out there) will show you all their work, and help with staging, and photos, and marketing. A broker's open house is another thing a good agent will do for you.
You may want to pull it from the market until sprint, find a new agent, and *maybe* fix one of the "pretty serious problems". What are those, anyway? And was any analysis done to see what fixing might yield? Sometimes a $1000 fix can yield $5000 in sale price.
tl/dr - get a better agent
posted by dbmcd at 2:21 PM on November 7, 2016

Reading your question again, and your updates, it sounds to me like your pricing might be too high. Your pictures/description/marketing sounds like it's probably good, because you're getting a fair amount of foot traffic through your house for viewings (20 in 2 weeks, you said). If people weren't coming through, I might suggest restaging the photos or trying to gin up more publicity. But it doesn't sound like that's the problem. It seems to me that people are interested enough to come look, but then they don't like what they see in person. The negative feedback you've gotten from prospective buyers suggests the same. In short, it sounds to me like your pricing is too high for what you're offering. Two comparable houses not selling for $210k doesn't sound like a good sign to me. I'm also concerned by your house's "share of pretty serious problems". What are we talking here? Because buyers will be mentally subtracting the cost of those repairs from your asking price, plus adding a bit extra for cushion. You might want to consider delisting your house, fixing the problems, and relisting in the spring. My realtor told me that many people nowadays (at least in my city on the East Coast) want a move-in-ready house, and you take a big hit if yours isn't. It might be cheaper for you to do the repairs and then advertise it as move-in ready.
posted by ClaireBear at 2:25 PM on November 7, 2016 [3 favorites]

The realtor is pushing to lower the price to 199, which I could afford to do, but it would be a bit of a defeat to let the house go for that low.

Here's the thing: someone will buy anything, if it is priced correctly. The question isn't what you want for your house - it's how much someone else is willing to pay for it. I've come across a surprising number of houses in my city (also a fairly hot real estate market) that have lingered on the market on and off for *years*. Why? I've looked at comps for hundreds of houses now and have a pretty good sense of my local market. The houses in question are really clearly overpriced - sometimes grossly. The sellers are making emotional pricing decisions, pricing it at what they want to get rather than what they realistically can get. One house I saw, not updated since the 1960s (faux wood panelling and everything!), was around $100k overpriced in my view. The lovely elderly woman owner that I spoke with when I viewed the house couldn't understand why no one was making any offers. Her pricing was in line with completely modernized houses in the area, not houses in the condition that hers was in (probably needed 70k worth of updating). In other words, her realtor failed her.

There's a right price for your house, based on your local market and your specific house's relation to it, and you and your realtor need to find it. How much you paid for it 8 years ago, whether you got a good deal or overpaid at that point, whether or not you're going to make a profit at sale, and all those similar sorts of ROI questions really have no bearing on how you should price it right now in order to sell it. You need to get a realtor who has a track record of actual sales. I might interview several realtors and ask them how they'd price it, just so you can get a good ballpark, and then pick the most competent one.

It does you no favors to have a house on the market for a long time. It becomes stale and people are likely to think there's something wrong with it, and then you'll get a lot of lowball offers from sharks who think you're desperate and smell blood. The best thing to do is to price it competitively from the get-go (say, 5% *under* its actual market value), and then have multiple people interested and ideally get a quick offer or even a bidding war. Overpricing it is not likely to lead to a higher sale price. I would seriously suggest working with an experienced seller's agent who can accurately gauge an appropriate sale price for the house in your current market. The most important thing here is finding out your house's actual current market value, which a competent realtor should have already worked with you to do.
posted by ClaireBear at 2:43 PM on November 7, 2016 [4 favorites]

2 weeks isn't very long. Realtor has only a little to lose. I'd wait.
posted by theora55 at 2:48 PM on November 7, 2016

2 weeks is like five minutes but I'd avoid using concepts like 'defeat.' Every sale is a meeting of the mind between willing seller and able buyer. Nobody wins unless everybody wins. It's worse than you're saying but not as bad as they're saying. Huge psychological barrier at exactly 199, too. Go with the realtor's recomendation, hope for a few offers, carry on.
posted by fixedgear at 3:43 PM on November 7, 2016 [1 favorite]

One other thing to consider when pricing a house that needs work...

If a house needs $50k in repairs, and is priced $50k lower than a house that doesn't need repairs, that does not put $50k in my pocket on day 1 to make those repairs. It lowers my down payment by $10k, and lowers my mortgage payment by maybe $200/mo. So if I need to do those repairs before moving in, I'm stuck somehow coming up with that $40k out of pocket. Yeah, maybe over the course of my mortgage, I'll make up more than the difference. But this is not easy for people who might be stretching their budget.

So if you're selling a house in need of repairs, and reducing the price just by the cost of those repairs, you're limiting your market to those who have a bunch of cash on hand (assuming they're repairs that need to happen right away, not just cosmetic updates and such).
posted by primethyme at 3:51 PM on November 7, 2016 [7 favorites]

Redfin is a pretty solid source. You can check the value of your home as well as recent sales in the area. That way you can try to figure out for yourself where your home should be priced. I don't think 2 weeks is long enough to start panicking. Hard to believe that the average time on the market is 50 days. Honestly I wouldn't drop the price until at least 30 days on the market. As a side note...keep in mind being on a busy street is for sure a negative on your house. But much less so IF you price it right.
posted by ljs30 at 9:55 PM on November 7, 2016

2nding everything ClaireBear said. When you talk about how much work and money you've put into the house, it really sounds like you are making your pricing decision based on emotions. We also follow our market closely, and we can peg over-priced houses easily without even looking at them. We won't even look at a house that isn't priced correctly for the market because we don't want the headache of dealing with an owner that appears to be unreasonable from the outset.

You stated that this really is a niche house, so you need to price accordingly. What are your motivations for selling? Do you need to move, or can you take the house off the market until spring when the market will be better? Do you just need to get out from under the payment? Then you are "motivated to sell" and you should lower the price.

I was just talking to a friend last week who told me the whole story about a house they own with family members. Some of the partners wanted to sell immediately, but the majority wanted to get the maximum amount of money out of the house that they could so they kept refusing to lower the price. If they had lowered the price by a few thousand dollars at the outset they would have made about $200K on it. Instead, they chased the market down for three years and are now stuck with a house that they can't afford the payments on, so they have to take in roommates. Don't let that happen.
posted by vignettist at 7:49 AM on November 8, 2016 [1 favorite]

I would suggest staging the house (and moving out, if you can). This is cheaper and may make the house look more valuable than the others on the market.
posted by Chaussette and the Pussy Cats at 11:50 AM on November 8, 2016

That would involve also asking for new photos.
posted by Chaussette and the Pussy Cats at 11:51 AM on November 8, 2016

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