Pricing of a home or property involves a lot of variables. There are the statistical aspects which are derived from data often pulled from the local MLS which includes key pieces of information like the quantity of properties sold, list price, selling price, days on market, and in-depth details on those properties. Contrary to what much of the public thinks, "comping" isn't simply what the home down the street sold for. Comping involves matching homes and calculating monetary off-sets for the differences in order to arrive at a value of the subject home. Although that provides statistical data, there is also the human factor. How people perceive the home... including the seller. Most sellers have some level of emotional attachment to their home. The longer they have lived there, usually the more attachment which can translate to over-pricing. Nearly every homeowner wishes to overprice their home which occurs for a few reasons: 1) they are emotionally attached to the property which translates to their perceived value, 2) they perceive the home as nicer than the others which makes senses because that's why they purchased it originally, however, other buyers my like other homes more which is why they purchase those homes, so this becomes a subjective opinion which is why statistical data helps bring an objective view to everything, and 3) the seller may simply want to reach for what I call "lottery money". They're simply wishing to hit the jackpot on a sale without reason or substantiation for the sales price. While not impossible, it's more along the lines of finding a needle in a haystack rather than appealing to the broad market. All of those reasons are why it benefits the process to take as close to an objective view of the home or property as one can to arrive at a true value that will appeal to the market. An experienced professional for the subject property type will be able to suggest home and property characteristics that may have appeal or provide objections to a wide buyer base when those buyers are comparing different properties.
Once the pricing process is completed and the home becomes active and available, a timer begins. That timer is called "days on market" which is the time from when a home goes active in the MLS to the time a contract is placed on the home. If a home should come back to market without closing and without being under a new MLS#, the days on market begin counting again. Days on market is a very significant indicator of how the market is responding to the listing provided the home or property has receive proper exposure. It should be noted that this is a relative measure though. For example, if a home is on the market for 14 days prior to going under contract, this may be great if the average (of like homes) is 30. The opposite may be true if the average is 4 (such as in a hotter market). A single number without basis is not enough to go on. It must be compared to the activity level for the subject property's market AND similar homes are experiencing.
If it's established that a home/property is lagging compared to similar properties, then the market is sending signals that the property is priced too highly for how buyers are perceiving the home. Pricing may even have been in-line with the statistical data, but perhaps there are one or more characteristics that are holding buyers back more than anticipated. Things like condition, finishes, datedness, size, layout, lot conditions, lot positioning, and external variables near the property. Once it's concluded that the property is lagging, there are few options. The most common are to either make the home/property nicer, or to reduce the price. The key to either of these is to not wait too long to take action. It is absolutely true that a property that accumulates too many days on market is harder to refresh in buyers’ minds. Even if buyers are only data-watchers and have never stepped foot in the home, they will begin concluding that something is wrong with the property. It's an example of herd mentality. The actions or lack of actions of others result in how others perceive something, and this is absolutely true of home buyers. Homeowners want to avoid that zone by monitoring the market's response early and take actions accordingly.
As a homeowner considering adjusting the price (downward) on a home, consider what motivates you. Would you be motivated over a small reduction? Not usually. Homeowners wanting to sell for the highest price often see reductions as money they won't receive - but the market has indicated they were not going to receive it anyway as the home was over-priced, so it's a hypothetical loss. The reduction is a measure to start asking the appropriate value of the home, and that's what sellers should focus on. Reductions can also be made in parallel with offering other types of concessions. Perhaps the seller offers to pay a portion or all of the buyer's closing costs. This can have both a positive psychological effect for buyers, and can also become a logistical appeal should a buyer actually need that in order to afford their closing costs in certain situations. There are various strategies to make the financial aspect more appealing the buyers.
With how today's buyers shop homes online and have auto-notices set up for various conditions, reductions can trigger new interest. A reduction may launch a set of notifications to buyers who have saved searches on all the real estate websites. Be sure a reduction is genuine though and not just a strategy to set off those notices. Some MLSes have rules in place for such behaviors to help ensure reductions are for the right purpose. With the proper reduction and market awareness, new and rekindled interest can be sparked for a property bringing it from a status of being stale to a status of having competing demand which supports the truth that properly prices properties will be welcomed by the market. One such case is a home listed that was an absolutely beautiful home in a highly-demanded area, but the exterior material of the home caused some buyers pause, and we recognized this pattern based on feedback. Through a carefully planned and timed reduction, new interest was sparked, an offer was accepted, and the home closed quickly without any hurdles.
The take-away is to price properties properly from the beginning. If a home or property encounters some push-back from the market, do not allow days on market to accumulate. Have a plan and implement it before the market starts labeling the property as "stale" and it begins to have a stigma to it because once that point is reached a home or property is going to need additional effort (reductions) to draw in buyers.
If you would like to discuss a buying or selling plan for a property, we would greatly enjoy working with you toward a successful transaction.