Price Reductions and Their Meaning

Another year, another opportunity!

By now the holiday hangover should have settled down and you’re at least halfway back to feeling 100% you again!
As we’re always looking to give you the low down on your Real Estate path, we’re tackling a key item today - Listen closely young Padawan …
If you’ve read the title then you’ve probably guess we’ll be discussing Price Reductions and what they mean. Yes, they mean something other than just a reduction to the cost of the home!

To grasp this properly, we need to explore what happens when a seller wants to sell their home. After a party has decided to list their property. Their first step will be to get their REALTOR over and give their home a value. The REALTOR will look at similar comparable properties either in the building and/or surrounding neighbourhood.

These similar properties are essential. Looking at these similar properties in the area, both ones sold and ones currently active on the market, will determine how the property will be priced, ready to hit the market.

The other very important factor is that these comparables be recent. They must be recent to apply otherwise they will not give an accurate reflection of the market. Naturally the term ‘recent’ is forever changing as time moves onwards and new properties sell or come to market.
Example: You decide you want to sell your home. You pick up the phone, call your REALTOR and you now have a Thursday at 3pm date. You’re agent searches comparables and together you price your home at $550,000. A month goes by without your home selling. However, you notice that the unit above and below you have sold for $500,000. These new sales are now more recent and a reflection of the market. Meaning your property price could now be over what the market is willing to pay.

After this circumstance has taken place, we’re brought to the subject of our blog, the Price Reduction….
Given the above scenario, a proactive REALTOR will have the discussion with their client on the new market value. Providing the seller is happy to comply with what the market shows, a price reduction will take place to reflect the most recent market. Maybe reducing the above example to closer to $500,000. 

This reduction shows you more than a reduced price. It shows you the seller is aware of the market AND they are understanding of realistic selling prices. When this is the case, an owner is (typically) more open to fair negotiations on price.
Hopefully your REALTOR is looking at the history of a home. Homes are on the market longer these days and that’s not always a problem. The history will show any previous price reductions and if you’re dealing with an owner who is likely open to negotiations and is serious about selling.

With good comes bad too, if the market is showing a very different price than the unit you are interested in, or price reductions, if at all, are in very minimal amounts, this can show a buyer is looking for a particular price and therefore may not be so open to negotiation.

The hidden message in between price reductions can show you what you are potentially looking to step into!
That’s it, we’re done! We want to make these blogs as insightful and helpful as possible to all you first time buyers out there, so if you have any desired topics you would like us to cover, feel free to reach out and let us know and we’ll make sure we get it covered!
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Jay Mcinnes
T: 604.771.4606

Ben Robinson
T: 604.353.8523