At what amount does "price reduction" make a difference to you?

[It'sJessMe]

I was browsing some listings recently and noticed several houses with recent price reductions, ranging from $10k to $30k. I started wondering how much that really matters, or does it depend on the overall price of the house? If you decided a $625k house was too expensive, would you now look at it if the price dropped to $615k? Obviously bigger drops and smaller overall prices is where the most impact will be felt, but at what point do you think "oh NOW it's worth it to look at that house"?

I know, I know, there's no one answer for anyone and every house and situation is different. Just curious about different perspectives.

[raider.adam]

I was browsing some listings recently and noticed several houses with recent price reductions, ranging from $10k to $30k. I started wondering how much that really matters, or does it depend on the overall price of the house? If you decided a $625k house was too expensive, would you now look at it if the price dropped to $615k? Obviously bigger drops and smaller overall prices is where the most impact will be felt, but at what point do you think "oh NOW it's worth it to look at that house"?

I know, I know, there's no one answer for anyone and every house and situation is different. Just curious about different perspectives.

It depends on comps and what you think it is worth and willing to pay.

If you aren't willing to pay more than $600K for the house, it doesn't really matter if it dropped from $1 million to $700K.

[It'sJessMe]

It depends on comps and what you think it is worth and willing to pay.

If you aren't willing to pay more than $600K for the house, it doesn't really matter if it dropped from $1 million to $700K.

Fair enough. But what if the house is at the top of or just outside of your price range? If I want to spend $575k, would I avoid negotiating for a $625k house but not for a $615k one? I don't think it would make a difference to me, but a $30k drop might.

[thegreattwizz]

Here's my experience:

In the car business, Autotrader.com is one the 'powerhouses' of online classified ads (Cars.com being the other); Autotrader has a policy that if you lower the price by 3% or more, it will get a 'tag' that says 'Price Reduced'. If someone has saved that car, they'll get an email. I know of dealers who have a policy in place of routinely lowering prices by 3.5% to take advantage of this.

Also, I have alerts set up on the CBPref.com site for rentals as a result of our time looking for a place in the city; CBPref sends a daily email with 'price reduced' on the rentals; some of them by as little as $50/month (and we're talking $3k listings). Does that matter? As a renter, to me, no, but if I were actively searching for places, this may be enough to remind of one I hadn't considered and to take a second look; renters will settle for something moreso than a buyer will.

That said, I've also been paying attention to the listings in the 19147/19106 zips as we're considering staying a while (we committed to the landlord we'd be here at least 2 years, probably longer) and buying instead of keep tossing it away on a rental, even though our rental is an exceptional value, and 30 years of rent wouldn't pay the interest on the mortgage, but that's another story......

None of the 'price reductions' would make me re-consider a previously un-considered home. I believe they are more of a ploy to put the property back on the map, top of search results, and for buyer's agents to re-engage their buyers by saying 'hey, this one was unreachable, but now it is in your budget'. I'm also not a fan of shopping with a firm budget, but I understand how many do. Routinely I'll see people say 'oh, I can spend 250k', and they'll only look at houses that are 225-275; nothing lower (or higher, for that matter). There are some grossly overpriced places waiting for a sucker, so I'd think that if someone wanted/liked a place, they'd always consider listing prices outside their budget and make an offer. This isn't 2001 anymore.

[raider.adam]

Fair enough. But what if the house is at the top of or just outside of your price range? If I want to spend $575k, would I avoid negotiating for a $625k house but not for a $615k one? I don't think it would make a difference to me, but a $30k drop might.

That's a different question than your original. Your original post was about the seller advertising a price reduction and this post is about the buyer asking for one.

[Templeton]

As a potential buyer I see a lot of homes that are "Priced Wrong". I've seen houses take 20-50k+ drops over the course of a year, which shouldn't happen. For me, I have a general idea (based on history and comps) and won't look at a house until it comes into an acceptable range. Why negotiate from 375, when the house should have been listed at 325 originally? I've actually waited until sellers come to their senses and accurately price their house before going to see it.

I think if more people would realistically price their homes a lot of the overhang of houses will be cleared out. If your house has been for sale for 6+ months, you probably overpriced it, and should consider a deduction.

[lastmonthsrent]

Try to think in terms of the seller and determine where they are at financially. I was able to recently negotiate a price for a buyer where the seller will be paying 10% the sales price at the table because they purchased the property with an FHA loan less then 2 years ago. The closing costs are killing him because they have no equity in the property. My point is the property had sat for a while because the seller was not in a position to make the price reduction. That said when it came to negotiating we lucked out. Most sellers in the same situation would not have been able to sell and pay like such such to get out of the house.

But to really answer the question about the price deduction if you are seeing a 5%+ deduction and the property falls in line with the comparable that have sold then you have a serious seller.
As for a ploy yes often a a small price reduction is made just to be seen as a deduction the mls. That's not necessarily a bad thing for sometimes gems do fly under the radar.

19106/19147 was mentioned and I must admit values are in wide range there and sometimes tougher to price out correctly vs other areas.

[It'sJessMe]

That's a different question than your original. Your original post was about the seller advertising a price reduction and this post is about the buyer asking for one.

No, it's the same question. I'm still talking about the seller advertising one. My use of "negotiate" was unclear. I meant that going into a discussion I assume there is some negotiation, and hence was questioning whether I would be willing to look at a house at $615k house if I wasn't willing to look at one that was originally listed at $625k.

[raider.adam]

No, it's the same question. I'm still talking about the seller advertising one. My use of "negotiate" was unclear. I meant that going into a discussion I assume there is some negotiation, and hence was questioning whether I would be willing to look at a house at $615k house if I wasn't willing to look at one that was originally listed at $625k.

If the drop still isn't in the range of what you are looking at, I doubt it makes all that difference.

[Naveen]

I was browsing some listings recently and noticed several houses with recent price reductions, ranging from $10k to $30k. I started wondering how much that really matters, or does it depend on the overall price of the house? If you decided a $625k house was too expensive, would you now look at it if the price dropped to $615k? Obviously bigger drops and smaller overall prices is where the most impact will be felt, but at what point do you think "oh NOW it's worth it to look at that house"?

I know, I know, there's no one answer for anyone and every house and situation is different. Just curious about different perspectives.

I think there are just too many variables to answer this question effectively. But yes, the overall price matters when considering whether a drop is significant enough to give the house another look.

[OldMama]

I had an atypical house for my neighborhood in that it had triple the outdoor space of other houses in the immediate area and a kitchen remodel which included removing a wall to make it eat-in and building a family room- no one else had done that. It was hard for the realtor to come up with an asking price based on comps. So she came up with a price based on square footage. After three weeks with no showings (granted it was the slow season for house sales), we dropped the price $10,000. Then I got lots of showings. So I think it can work, especially if the price reduction makes the price more appropriate.

[thesomersteam]

Good discussion here. Price reductions are essential more often than not to get a property sold to have more buyers come through as most sellers typically start the listing price too high for a variety of reasons (they really believe it is worth it for emotional reasons, they need the proceeds for a number of reasons so "have" to sell at a certain price, are afraid to sell for less than what it is "worth", like someone else said before perhaps they will be bringing funds to the settlement table or simply do not have a lot of motivation). The sellers that price the properties right have the most leverage at the end of the day. Getting back to the question, the reduction in terms of percentages means more than dollar amount and getting the price to a meaningful breakpoint for consumer searches. For the example that was given, going from $625K to $615K will do very little to increase showings (that drop is only 1.6 percent). However around a 5 percent reduction to $600K will be meaningful as it will bring the price down to a different breakpoint for consumer searches (for example, a buyer searching homes $500K to $600K or $550K to $600K). In the case of $105K home, just a $5K drop (which is also about 5 percent will bring that down to the $100K breakpoint).

[It'sJessMe]

Good discussion here. Price reductions are essential more often than not to get a property sold to have more buyers come through as most sellers typically start the listing price too high for a variety of reasons (they really believe it is worth it for emotional reasons, they need the proceeds for a number of reasons so "have" to sell at a certain price, are afraid to sell for less than what it is "worth", like someone else said before perhaps they will be bringing funds to the settlement table or simply do not have a lot of motivation). The sellers that price the properties right have the most leverage at the end of the day. Getting back to the question, the reduction in terms of percentages means more than dollar amount and getting the price to a meaningful breakpoint for consumer searches. For the example that was given, going from $625K to $615K will do very little to increase showings (that drop is only 1.6 percent). However around a 5 percent reduction to $600K will be meaningful as it will bring the price down to a different breakpoint for consumer searches (for example, a buyer searching homes $500K to $600K or $550K to $600K). In the case of $105K home, just a $5K drop (which is also about 5 percent will bring that down to the $100K breakpoint).

Thanks! I think 5% regardless does become meaningful for a lot of people even if it doesn't cross the breakpoint necessarily (e.g. a 650k house that dropped by 5% would still be in the over $600k price range but I'd look at that new price and think "oh that's a lot".)

[thesomersteam]

Thanks! I think 5% regardless does become meaningful for a lot of people even if it doesn't cross the breakpoint necessarily (e.g. a 650k house that dropped by 5% would still be in the over $600k price range but I'd look at that new price and think "oh that's a lot".)

You are welcome. And agreed.