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If you are thinking about buying or selling a home, it is important for you to know how much home sellers come down when negotiating the price.
In St. Louis, over half of the home sellers come down less than 3% of the sale price.
The chart above shows all of the MLS listed house and condo sales with sale prices from $100,000 – $800,000 in St. Louis City, St. Louis County and St. Charles County.
The data reports the MEDIAN price reduction for home sales over the last 2 years. This means that half of the sellers came down less then the median value, and half came down more.
Keep in mind that these numbers do not reflect how much the sellers came down from their original list price. A seller may have reduced the price several times before getting a contract.
Why is this important?
Sellers need to understand how much a buyer will typically expect them to come down. They need to be prepared to come down 2-5% or they will have a hard time getting a contract accepted.
Buyers need to anticipate how much they might be able to get the price down so they aren’t looking at homes they can’t afford. If a buyer can afford to pay no more than $200,000, and the vast majority of sellers come down no more than 5%, the buyer shouldn’t be looking at homes priced more than $210,000.
There ARE sellers that will come down more from their current list price, but these are the homes that have typically been on the market for a very long time and have had several price reductions already. These sellers recognize that they might not sell at all, and a buyer can get a big discount on these homes. However, homes that have been on the market for less than 90 days rarely sell for huge discounts.
Condos vs Houses?
When you break down the statistics by property type, you can see that sellers of condos come down more than sellers of houses.
Condos are more likely to have direct competition from other listings that are very similar. When the owner of a condo gets an offer and there are other condos for sale in the same complex, they always worry that the buyer will move on to option #2 if the seller isn’t agreeable.
Sellers of Expensive Homes Come Down More
How much a seller comes down is related to supply and demand. When there are a lot of buyers looking for homes in a price range and area, the homes sell more easily and the sellers don’t have to come down as much.
With fewer buyers for more expensive homes, sellers end up coming down more. I also find that pricing is less exact at higher price points. In a subdivision with homes selling from $175,000 – $200,000, the price gap between a home that is in poor condition vs one with all of the latest upgrades is narrower. It is easier to review the comps and set a price that buyers will think is fair.
In contract, a more expensive subdivision may have only a handful of recent sales that span $100,000. When you know your house is better than the house that sold for $500,000, but not as good as the one that sold for $575,000…and nothing else sold between those 2, it’s a guess as to where to price it. Sellers usually guess high, and the result is that buyers often must push the price down in negotiations. While the seller can refuse to come down and let the buyer move on to another house, many worry when another buyer will come along and will try to make the deal work.
Making Sure Your House is STILL Priced Right
One of the biggest mistakes that sellers make is they look at the comps with their agent and set a price. And never look at the comps again.
Things can change quickly, making a house worth less than the original pricing analysis indicated.
- Competing homes can drop their price, making you overpriced.
- New listings can come on the market that are nicer and cheaper than your house.
- Competing homes that seemed similar can fail to sell, and if you used these homes to justify your price, then you are likely not going to sell either.
- Homes that were under contract when you set your price can close for a much reduced price, making you look overpriced.
Unfortunately, changes to the market that happen within months of you listing your home won’t make your house worth more. If competing homes come on the market that are more expensive than your house and sell before you do, it’s hard to make the argument that your house is suddenly worth more.
Raising your price when the buyers already looking have rejected it makes no sense. If you are underpriced, your house would have sold.
Weekly Housing Market Report:
One of the things I offer my sellers is a weekly housing market report that is customized to make sure they remain competitively priced throughout the listing period.
I track showings, feedback, competition levels, new listings, price reductions, homes under contract and closed sales.
Here are a few screenshots of some of the pages in my weekly market reports.
It’s important to understand how much available competition there is compared to how many of the competing homes are under contract. It’s also important to monitor both the micro market (properties that are the most similar in location, price and features) and the larger macro market.
One of the things I manually compute is the number of days it takes for properties to sell at their current list price.
In the sample report above, 2 of the properties that went under contract were new listings (14 days and 3 days). One property had been on the market for 88 days but had dropped the price only 6 days earlier, and one had been on the market for 146 days without a price drop.
I find that the vast majority of properties go under contract either as a new listing or within weeks of a price drop. Understanding these trends, and how much sellers came down from their original list price before getting an accepted contract, is important information sellers need when deciding what to do if their home isn’t selling fast enough.
If you are thinking of selling your home in the St. Louis area and would like my weekly market update AFTER you list your home, hire me to be your listing agent!
Are You Thinking About Moving?
I specialize in selling St. Louis homes regardless of whether they will be the hot listing to hit the market or if they have a challenge that makes it much harder to sell.
I also work with buyers who want to find the home of their dreams, but don’t want to overpay.
If you are thinking of buying or selling a home in the St Louis area, give me a call at 314-265-8073 and let’s talk about your options.