Why You Should Drop Your Price

With less than five days left to sell the Freund family's house, "Good Morning America" real estate contributor Barbara Corcoran says that proper pricing of the home is half the battle.

Real estate expert Barbara Corcoran says you need to step back and assess if you should drop your price.

(ABC News)

Corcoran's challenge is to get an offer on the Toms River, N.J., home by Monday morning, and the house has been sitting on the market for six months.

The Freunds listed the four-bedroom, two-bathroom house in April for $374,900.

They later reduced the price to $359,000, which is where it stood when Corcoran's challenge began.

"I wanted to go down all the way to $299,000, but the reaction to that, of course, was, 'Oh my God, why underprice it?'" Corcoran said.

"Here's why: I think that's the best way to get more than the home is worth, because a bidding war starts and everyone recognizes the value. The lower the price the more buyers you can catch."

Corcoran and the Freunds compromised on an asking price of $339,000.

The first thing people need to do when deciding on a competitive home price is to separate themselves from the house.

"The facts you need to look at is who's competition, who's the enemy," Corcoran said. "They had 40 competitors in their price range, within $15,000 of one another. … Know the category you're in. There are 40 other bilevel homes in this area asking around the same price. So what you need to do is observe the competition, then undercut the competitors."

If you're going to come down in price, Corcoran says to drop to the next category.

Housing is listed in $50,000 increments.

"People shop in categories, so in changing the category, you expose your home to more buyers," she said.

"And remember, do it all at once. One big reduction is better than five small price changes. If you just can't stomach the price drop, consider alternatives, like giving away one year's free mortgage. "