Now you’ve all recovered (hopefully) from your holiday season hangover, we’re back at it and hitting the ground running with the information that matters to you in your real estate journey!
There has been a lot of doom and gloom talk with the market, but today’s topic is more on a positive note! After all, we’re all going to crush 2019 RIGHT?!?!
As the title gives away, we’re going to be breaking down Price Reductions and what they mean, beyond the obvious of a reduction in the amount you need to pay for the home!
In order to do this, it’s best to take a step back to the beginning process of listing a home. When someone decides they want to sell their home, they typically reach out to a REALTOR who will view the unit in person (hopefully) and use comparables to put together a price at which the home will be listed at.
These comparables are the key here. Using these comparables of recent sold and active units, either in the building or in a close vicinity, will determine the price of your home. If you’ve listened/read our blogs and podcasts, you’ll know sold comparables are more key than active ones!
Further from this, these comparable are recent. Which is what makes them apply to the pricing structure. As time progresses, these comparables can become irrelevant and new ones become ‘recent’, replacing the previous recent ones. Don’t worry, we have an example for you below...
I.e. Let’s say you have gone through comparables with your Realtor and they are showing you a listing price of $599,000. You list at this price and a month goes by. After this month, your property has not sold, however two units in the building HAVE sold. These units sold for $565,000 and are very similar to yours give or take. These two units were previously active units and are now sold, making them more relevant and a more accurate representation of where the market is currently at.
This now brings us to the price reduction itself….
With these changing comparables, it’s likely you will see a price reduction in the surrounding units when this scenario comes into play. As well as just reducing the price, this also shows to a buyer the owner is aware of the changing market and is willing to either negotiate based on the current market conditions, or wants to hold out for a higher price.
Not only should you be looking at a unit, but also its history when you are interested. Multiple price reductions is not necessarily a bad thing. It shows you, the buyer, that you are more than likely dealing with an owner who is keeping up to date with the market and open to negotiations that are fair to the market. On the other hand, if you notice a unit is reducing in minimal amounts each time or not at all, this can show the owner may not be so open to negotiations. Of course this is not a rule and may not always be the case.
But reading in between the lines can give you an idea of what your going to be dealing with should you move forward with that property.
And just like that, our first blog of the new year is done! New Year, same us! We’ll be back every week to keep you in the know!
Thanks for reading!