Big Cuts Might Draw Offers

By Dave Fratello | October 18th, 2019

We were recently working with some buyers just outside the MB area who wondered if they'd stumbled upon a huge deal.

A property had been on the market for $3.5M, then $3.2M, months had passed, and there had been no action.

So the seller cut to $2.000M. Overnight, almost 40% off the top!

Could we really get it for $2M?

You probably have guessed: No.

That outrageous cut was a gambit. It was an effort to draw attention and multiple offers and to help find the market level for the property. And they did get their multiple offers. (Although we do not believe what prices the agent claimed to be getting on the offers, but that's a story for another day.)

Too bad real estate prices aren't like prices on, say, a jacket at the store. Imagine going to check out on that marked-down item and the cashier says, "Ha ha, no, actually, $149 is not the actual price, we were hoping you'd pay $250 now, seeing as how you're here with credit card in hand!"

Sometimes a home seller needs to try trigger an auction, and their price cut may seem daring at first. They've got to white-knuckle it a bit, hoping that the tactic works.

329 4th Street Manhattan Beach CAThis is all called to mind now as we see a price cut at 329 4th (3br/2ba, 1700 sqft.).

It's a darling little original cottage with additions on one of the quieter South End family walkstreets.

Everyone should feel confident about its market value, because it has traded twice in the past 16 months:

- once for $3.975M (June 2018), and

- once for $4.000M (June 2019).

The most recent buyers upgraded the already-nice home with new flooring, counters and so forth, but then had a change in plans.

329 4th Street Manhattan Beach CAProud of their work, they tried first to resell in August at $4.399M.

Over 5 weeks, they brought the price down to basically their purchase price: $3.999M.

Now, a month later, it's down $200K more, to $3.799M.

Reminder: The market has already told us twice recently that this home is worth $4M.

So you have to infer that the latest $200K price cut is a bit of a gambit, a signal: Come one, come all, we're ready to sell!

Of course, the tactic can be a bit nerve-wracking. What if they only get offers at $3.799M?

What if no one will pay $250 for the $149 jacket?

For now, the first part of the job is done. Word's going to spread. People who liked the house will re-consider it, and measure how good of a deal they feel they can get.

Next, we'll see how well the tactic works.

Something a bit similar was tried recently at an oversized Tree Section Mediterranean along Ardmore.

1021 33rd Street Manhattan Beach CAThat home, 1021 33rd (5br/4ba, 4000 sqft.), began in July at $3.799M.

A series of cuts ensued, bringing the price down as far as $2.999M within several weeks.

The final cut to $2.999M worked. They accepted an offer just 3 days later.

Alas... the escrow flopped. 10 days later, the home was back on the market.

And now, 3 weeks after its return, 1021 33rd is still looking for a new buyer, and still at $2.999M. Perhaps that illustrates a risk of cutting to draw offers... you might get stuck at the lower price.

UPDATE: Several hours after this post went live, 1021 33rd was back in escrow.

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