Luxury Home: Reasons Sellers Drop Asking Prices

In many instances in life, flexibility can be key to salvaging a bad situation. The real estate market is no exception, and buyer interest – or the lack thereof - can sometimes force sellers to make adjustments. Lately it is has become common for sellers to make such adjustments by dropping the initial asking price for luxury homes. 

In fact, it has almost become the norm recently in the luxury real estate market ($5 million and above) for properties to be reduced from the initial asking price. For example, a 5-bedroom $10.5 million condo in Manhattan sat idly on the market for almost a year. When it was reduced to $9 million this past February, it sold within two days. A reduction of $1.5 million is substantial, but the seller may have felt compelled to finally act after the condo had languished on the market for so long. In this particular case, the seller also promised the buyer tickets to Hamilton, which may have encouraged the buyer, but the price cut was clearly the major factor in getting the home to sell.

A number of different explanations have been offered for the price reductions currently being seen in the sale of luxury homes. Some people are of the opinion that the high-end market is evaporating, while others believe it is an ongoing correction marking the end of the luxury real estate boom. Here are some other possible causes of price cutting by sellers:

·      High Listing Prices: Buyers have budgets, and if your asking price seems to be on the high side, buyers will look elsewhere. Most sellers are forced to reduce their asking price when it has been set too high for the market.

·      Uninterested Buyers: If a home has been listed for quite some time without any sale, the property tends to be overlooked. One way to revive interest is by giving the asking price a cut.

·      Low Offers from Buyers: No matter how high your expectations, if buyers don’t feel the property is worth the asking price, you will likely see low offers if you see any at all. This might mean a price adjustment is in order.

Some years back, record sales were making headlines, encouraging sellers to ask what seemed like staggering sums of money. The aspirational pricing technique was driven by the desire for personal gains over other factors. Aspirational pricing has been giving way to a more flexible and negotiable pricing where buyers are more focused on their budgets.

The fact that more sellers are reducing the prices of their luxury homes is an indication that they are ready to be more realistic about the values of properties being listed for sale. The global economic situation is shakey, and buyers are being much more careful. These factors are having a sobering effect on the luxury real estate market.

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