Updated: Feb 15
Whether you call it a price reduction, adjustment, or improvement, if you have your house up on the MLS sites for quite some time without success, then dropping your asking price might seem inevitable. But is it the right step towards selling your property more efficiently? For some properties, curtailing the asking price can yield new interests from buyers who initially wouldn’t fall into the buying category due to non-affordability. While the viewing was on pause, some potential buyers waiting under the wings for an opportunity to view your home can now make lucrative offers, proffering hefty down payments upfront. A lot of things factor into how much is the worth of your house. Understanding these prudent parameters can help navigate the reasons behind dropping your houses’ asking price.
1. Deferred maintenance
Even if it’s not broken, it will still influence the buyers. Do you have a backlog of major repairs such as leaky roofs, damaged or old HVAC systems, frayed electrical wiring, cracked stairways, busted plumbing, or mold problems? The outdated or damaged structures are the culprits for the lack of offers at your table. When your home is in the market longer than the comparable homes in better condition, and you don't have ample resources or finances to sort out these severe repairs, it is high time that you compensate the buyers by lowering your asking price.
2. Foreclosures/ Short sales
A surplus of homes in your neighborhood that are in foreclosure or available at short sales can exponentially hurt your home's value by skewing comparable sales in the neighborhood. This is because the appraisers look at neighborhoods comparable to estimate the value of your home. The buyers take advantage of the situation by investing in low-priced homes nearby, or they may turn their back on your oh-so-perfect house just because they are unsure if it is the right decision to invest in this locale. How would someone feel about buying a house next to the one that has been foreclosed on? If they would still be interested in buying, it is viable to negotiate the price down.
3. Economic instability
As a rule of thumb, a struggling local economy that doesn’t yield stable job opportunities can be an imperative reason contributing to a knock-on effect on the home’s value. The influx in economic stability may lead to job scarcity and high unemployment rates, putting home owners in jeopardy. Like a domino effect, the percentage of potential buyers in the market will drastically fall, which will lead to foreclosures and short sales. Tapping into the buyers' market, the economic cut down will create an uproar in the competitive market, forcing owners to reduce their asking prices to compete in the diminished market.
b. Increasing mortgage rates
In a low-interest rate economy, the buyers can afford to spend more on a house because the monthly mortgage payments will be lower. But the unstable economy stirs an air of inflated interest rates which hampers the buyer’s potential to spend on the initial purchase price. With the spike in the interest rates, he will be mandated to pay a hefty amount over the life of the loan.
Your asking price is not just the depiction of how well maintained your property is; your house is valuable because your demand is in the range of 25 prospective buyers. But as soon the mortgage increases, these numbers decline to 10; forcing you to lower your list price to tempt buyers.
4. Poor neighborhood conditions
Your house may reflect all the exquisite features to hitch the sight of the prospects, but the buyers have to drive past the neighborhood to see if your house justifies its asking price. It is not just about making memories in a house, it is about the locale where the buyer is going to raise his children. A glance at the unkempt yard next door, neighboring houses with peeling paint, broken outdoor fixtures, and messy roads can sway him away quickly. Even the coveted neighborhood can lose potential buyers due to one rotten egg. If you are that one unlucky owner stuck in this neighborhood, your house may linger on the MLS list for months. If that's the case, reduce the asking price to compensate the interested parties.
5. Less than the ideal location
Proximity to unpleasantries can negatively impact the houses' value. Despite owning a well-maintained house, noisy, odorous, and hazardous infrastructures instantly give an edge to the buyers to negotiate their terms on the table. Similarly, the less connected the property is from the essential utilities, educational institutes, healthcare centers, business districts, recreational facilities, parking space, the more you are vulnerable to adjust your asking price.
6. Home improvements, not build to code
Upgrading your home while ignoring the legal proceedings or without a permit can take a toll on your house’s worth in the long run. Even if the up-gradation adds to the house's aesthetics, the unpermitted renovations made without taking a legal course of action won’t be counted in the square footage in a home appraisal. Instead, you will have to pay from your pocket to escape the charges. Savvy buyers will negotiate their terms considering getting a retroactive permit and paying for the illegal constructions.
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