Price Reductions: What do they really mean?

For buyers, finding a price-reduced home can feel like a steal. But is it really?

For sellers, it may feel like a huge deal to drop the price of your home. Will this deter buyers, or bring unwanted attention to my property?

Today we’ll dive into the ins and outs of price reductions, and what they mean for both buyers and sellers.

Buyers:

Finding homes that have had their prices reduced is easy. It will be indicated on realtor.ca, and you can even search specifically for homes with reduced prices. With a great real estate agent, you’ll be able to find out about price reductions before they happen, giving you the upper hand over other sellers.

However, price reductions don’t always mean that you’re getting a great deal. Depending on the listing agent’s strategy, this may mean they priced too high and the market adjusted during their period on the market, or they could be hoping buyers didn’t notice something wrong with the house.

If you are looking at a house that has had its price reduced, it is wise to look at how long it has been on the market and whether or not it has had any offers, inspections, or conditionally sold periods during this time. Have your agent try to do some investigating; did a contract fall through at some point? Did a house inspection find something that made them need to lower the price for the next set of buyers?

Despite this, there is just as much of a chance that the agent and homeowners are honest people who made a price decision in a quickly changing market. If this is the case, you’re probably just seeing a home adjusted to its new evaluation in a market that is, especially at the moment, fluctuating and changing at a rapid pace.

It is also just as possible that a seller may have asked their agent to list higher than recommended, and is now coming down to the price their agent predicted. For the same reason as above, prices are lower now than they were even 6 months ago.

Sellers:

If you are the seller of a home and your agent has suggested a price reduction: don’t panic! There are a few great reasons why your agent may decide it’s time to drop the price of your home.

First and foremost, the reason we’ve already discussed, is that the market has changed. In 2022, we’ve seen some intense fluctuations in the market as inflation skyrockets and conflicts arise around the world. As interest rates rise, housing prices are dropping to try to entice buyers who may have been forced out of the market. If your real estate agent has advised that you drop your price, it may be to adjust for these fluctuations - this is just the new evaluation for your home!

Secondly, a real estate agent may be interested in dropping the price of your house in order to get more interest from buyers. This doesn’t mean that your house will sell for this amount, though! Sometimes, a well-priced home will gather more interested buyers, meaning more offers, and may sometimes gather larger offers than homes that are priced right at market value. This could be an excellent strategy depending on how the market is when you listed, and the type of home you have.

Finally, your home just may not be comparing well to similar properties your agent used to decide on price originally. Perhaps buyers are interested in something different at the time, or there are too many houses similar to yours on the market at the moment at a lower price. Whatever the reason, it may mean your home just isn’t worth what was originally predicted.