As a Realtor helping a Seller you do a Comparative Market analysis and present that data to the Seller to help them choose a price which will attract the most buyer interest in the least amount of time. I know you do that, we all do that. But ... when you look at your MLS data are you seeing the whole picture? In my market in St. Louis, the average days on market is 118 days, but is it? When you do a CMA try this, check the history of those listings. Note the date of the last price reduction and note the date that the status changed from Active to Pending (or whatever designation that indicates an accepted offer). The MLS reports days on market as the number of days from the time the listing went Active to the time it's status changed to Sold. If that listing was "do not show until ..." or was overpriced for 30, 60, or 90 days before a price reduction attracted a buyer, all of those days are included in the DOM number in your MLS! In addition, if you have an accepted offer but the Buyer can't close for 30-45 days, add that on too. A properly priced listing that goes under contract in 1 week, can still show 30-60 days on market!
When we looked up the history of dozens of homes, we found that, on average a properly priced home will get an accepted contract within 30 days of being priced right! Furthermore, that number doesn't change much over a wide variety of price ranges or geographic locations. This is wonderful news for your Seller. If the price they choose is the correct one, they'll know very quickly, within 3-4 weeks. If there still isn't an offer, they know not to wait, it won't get better for a very long time.
So if we know a properly priced home is under contract within 30 days, how do we know what price to ask in order to get that outcome? Dig deeper into your MLS data. Our MLS used to report LP/SP ratio using the most recent price as the list price. They have changed recently to using the original price. Both numbers are important. The price at the time of contract shows the price that attracted a ready, willing and able buyer. The original price shows the price that the seller really wanted but didn't get. If your MLS is like ours, look at the price of the listing at the time it went under contract. Compare that to the sale price, I'll bet that the average LP/SP ratio will be around 95%. That tells us that when we find a price that is within 5% of what a buyer will pay for a home, we'll have a contract within 30 days. If that's true, price reductions should be in 5% increments. You'll also note that those listings that took the longest to get a price reduction or reduced price too little have longer days on market than those that were priced strategically in the first place. You will see that some listings still sell for 99% or even 100% of list price. You can't go too low, when your listing looks like a deal, you get offers, if it looks like a GREAT deal you get A Lot of offers! The buyers will actually push up the price for a very desirable home.
Don't chase the market, get ahead of it. If you have ever chased a ball down a hill, you know that the only way you'll ever catch it is to get in front of it. A declining real estate market works the same way. The only way to catch the market is to get ahead of it. If DOM are 30 or less for successful listings, and LP/SP ratio is 95% or better for successful listings then the only guaranteed strategy is to reduce price by 5% every 30 days, you will get an offer!
You can also use this same data when working with a buyer. A buyer may look at a listing and say "well it's been on the market for 180 days, I think I'll offer 70% of list price and see what they say" I try to help the buyer understand that the total days on market doesn't count, it's the days since the last price reduction that count. And no-one is taking 70% of list. We can try for a 5% to 10% discount, but a listing that sells for less than 90% of the asking price at the time of offer is really rare!
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