How Price Drops Can Hurt Your Chances of Selling Your Home

Selling a home can be a challenging and stressful process. One of the most significant obstacles that sellers can face is pricing their home correctly whether they are selling a home themselves or using an agent to do so, the same obstacles may still apply. While many sellers hope to receive the best price and terms for their property, sometimes, circumstances require a price drop to attract buyers or sellers think that by dropping the price, by a little or drastically, buyers will flood them with offers for their homes. This may be true, or at least the perception, but it may not be the offers that the seller would be satisfied with and create an outcome that does not validate their expectations. Simply, small or drastic price drops can hurt your chances of actually selling a home in several ways.

Perception of the Property

One of the primary ways that drastic price drops can hurt your chances of selling a home is by creating the perception that there is something wrong with the property. When a home sits on the market for too long, buyer psychology leads buyers to begin to wonder why it hasn't sold and assume that there are significant issues with the property. This perception can be exacerbated by a sudden price drop, which may lead buyers to believe that the property was overpriced in the first place and that there are hidden problems that they are not aware of or both. This negative perception can make it more difficult to attract serious buyers and may start a trend of receiving offers that aren't even close to your new asking price after the drive drop and most importantly, may now we below the true market value your home is actually worth in its present condition.

Limited Buyer Interest

While it may seem like a good idea to drop the price of your home to attract more buyers, it's important to consider the quality of those potential buyers. Drastic price drops can actually limit buyer interest from qualified and motivated buyers while attracting those who are uneducated or have no intentions of actually buying a property or staying in the transaction until closing. This can leave you dealing with a pool of unqualified or unmotivated buyers, reducing your chances of receiving offers that are close to your asking price and ultimately forcing you to settle for a lower offer than you would have received otherwise. Don't let a misguided pricing strategy hurt your chances of selling your home to the right buyer.

Reduction in Profit/Equity

Of course, one of the most significant ways that drastic price drops can hurt your chances of selling a home is by reducing your profit. When you drop the price of your home, you are essentially lowering your expectations for how much you will receive from the sale and sending the same message to buyers in the marketplace. This can be particularly challenging if you are relying on the proceeds from the sale to fund your next purchase or to pay off other debts. A significant price drop can impact your bottom line drastically, making it more difficult to achieve your financial goals or not being able to leverage the most out of your home sale. However, not everyone is motivated by price in a home sale so if this is not a priority for you, it may not be the biggest concern. 

Appraisal Value

When it comes to selling your home, it's important to understand the potential consequences of dropping the price too drastically. One such consequence is the effect it can have on the appraisal value of your home. This is especially important to consider when a buyer is purchasing a home with a loan, which is the case for the majority of buyers in the marketplace. If the appraised value of your home is significantly lower than your asking price, it may be more difficult for buyers to secure financing for the property, which can cause the sale to fall through.

It's crucial to remember that although it is ultimately the buyer's responsibility to secure financing for their home, the bank or lending institution will take various factors into account when deciding whether to approve the loan, including inspection, appraisal value, and recent sales. This can be frustrating and time-consuming for you as the seller, as you may be left waiting for weeks or even months for a buyer to secure financing. In the meantime, the market may have changed and other potential buyers may have lost interest in your property, leaving you back at square one.

While price drops can be an effective tool for attracting buyers and selling your home, it's important to use them strategically and avoid drastic reductions that can hurt your chances of actually closing the sale. Don't let a misguided pricing strategy hurt your chances of actually selling your home. By understanding the potential consequences of drastic price drops, you can make more informed decisions when it comes to pricing your home and attracting the right buyers which will ultimately lead to a sale.