Home Sellers Have Little Leverage

Home sellers don’t have it easy these days.

Many are finding that the only real tool they have to lure buyers is the asking price – and it isn’t providing much leverage.

Market conditions are making it especially tough for homeowners to offload their properties. Nearly a quarter of home listings on the market as of July 1 experienced at least one price reduction, a 9% increase from the previous month, according to real estate search site Trulia.com. The average price drop was 10% off the original listing price – about the same from previous months.

In 22 of the 50 largest cities, 30% or more of homes for sale have had price cuts, higher than last month, which had 10 cities with that level of reductions, according to Trulia. Sellers in some areas are worse off than others: Minneapolis topped the list for the third consecutive month with 40% of its listings getting a price cut, while 33% of Phoenix’s listings got chopped.

Overall, inventory has increased, while demand for homes has dropped off, says Ken Shuman, a spokesman for Trulia.com. “We’re starting to see sellers begin to panic again,” he says. “In a normal cycle, the summer is a busy season, but we’re not seeing that happen.” The tax credit, which expired at the end of April, pulled qualified home buyers forward.

“Sellers in our area are definitely seeing the need to lower prices of their homes,” says Cindy Shetterly, a real estate agent in northern Kentucky. With 75 to 100 homes being listed daily, the competition in her market has heated up, Shetterly says.

So how can home sellers avoid the trap of repeatedly lowering the asking price – and dragging out the selling process? They should first start with a knowledgeable real estate agent who has experience in their neighborhood.

Here’s what else to consider when selling.

Don’t test the waters with a high price

This is tempting for many homeowners. But in a competitive market where values are falling, listing your home at a price you know to be unsupported – with the assumption that buyers will be eager to negotiate – isn’t always a savvy move.

Cindy Stackhouse, president of the Virginia Association of Realtors, says sellers must consider the staleness factor. Say a new house comes on the market at $200,000. There’s a comparable home in the same neighborhood with the same asking price, reduced from $260,000, but has been listed for many months. Buyers will get more excited by the new listing. They'll assume the owners are at the bottom of where they’re willing to go on price, and will want to make an offer – and possibly negotiate – on the newly-listed property, she says.

The first two to four weeks are critical

Every real estate agent will tell you that it’s critical for a seller who wants to retain leverage to price their home right from day one.

Knowing when and how much to reduce your asking price can’t be converted to a formula. But many agents will look at time on the market and number of showings to determine if a reduction is appropriate.