“Location, Location, Location” “Context, Context, Context”

What can you confidently say about a “For Sale” home whose price was just reduced, days before Christmas?

A. The home is now a bargain.
B. The Seller is motivated.
C. The Seller’s Realtor (listing agent) is motivated.
D. The home is better-priced** than it was before.

Correct answer: “D.”

Here’s the answer key:

A. If the Comp’s (“Comparable Sold Properties”) suggest a home is worth around $300k, and the owner listed it for $350k this Fall, dropping to $340k or even $325k(!) now doesn’t make it a steal . . . it just makes the home less overpriced.

B. Maybe, based on the timing.

Sellers who reduce their price during a typically (very) quiet time of the year are up to . . . something.

It’s easy to spot unmotivated Sellers this time of year: they switch to TNAS (“Temporarily Not Available for Showing”), or, defer coming on the market till after the holidays.

By contrast, Sellers who drop their price just before Christmas could be signaling motivation.

Or, they may be banking on the lack of competing activity to stand out (searching thru MLS this afternoon, I found fewer than a couple dozen price reductions the last week or so, out of more than 10,0000 active listings in the Twin Cities).

C. Also possible. If the listing shows up as “Expired” on January 1 . . . that was it! 

D. Not very satisfying, I know. But, unless you’ve studied the Comp’s, are personally familiar with the home (Zillow doesn’t qualify), and are privy to the home’s showing activity and showing feedback . . . you really can’t say for sure if the home is now a bargain.

Of course, a $10k price reduction on a $150k property is much more significant than on an $800k one (in the latter case, I’d argue that a 1% change in the asking price doesn’t really qualify as a price reduction).

It all sort of recalls a joke I heard, years ago, in a previous career:  “If you point to a horse in a pasture and ask a CPA what color it is, what will they say?” “This side appears to be brown.”

**Realtors prefer the term “price improvement” to “price reduction.”

See also, “New Year . . . New Realtor??“; “The Right ” and Wrong ” Way to Telegraph Seller Motivation“; “Is the Seller’s Price Soft? Two Ways to Find Out“; ““Nurse! I Need a Price Reduction, Stat!!”“; ““Gone (Ice) Fishin”“; and “How to Identify a ‘Motivated Seller.'”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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