In today’s market, where demand
is outpacing supply in many regions of the country, pricing a house is one of
the biggest challenges real estate professionals face. Sellers often want to
price their home higher than recommended, and many agents go along with the
idea to keep their clients happy. However, the best agents realize that telling
the homeowner the truth is more important than getting the seller to like them.
There is no “later.”
sometimes think, “If the home doesn’t sell for this price, I can always
lower it later.” However, research proves that homes that experience a
listing price reduction sit on the market longer, ultimately selling for less
than similar homes.
recipient of the University Distinguished Faculty Award from
the Eberhardt School of Business at the University of the Pacific,
actually did research on the cost (in both time and money) to a seller who
priced high at the beginning and then lowered their price. His article, Listing
Price, Time on Market and Ultimate Selling Price,published in Real
Estate Economics revealed:
“Homes that underwent a
price revision sold for less, and the greater the revision, the lower the
selling price. Also, the longer the home remains on the market, the lower its
ultimate selling price.”
the “I’ll lower the price later” approach can paint a negative
image in buyers’ minds. Each time a price reduction occurs, buyers can
naturally think, “Something must be wrong with that house.” Then
when a buyer does make an offer, they low-ball the price because they see the
seller as “highly motivated.” Pricing it right from the start
eliminates these challenges.
Don’t build “negotiation room” into the price.
say that they want to price their home high in order to have “negotiation
room.” But, what this actually does is lower the number of potential
buyers that see the house. And we know that limiting demand like this will
negatively impact the sales price of the house.
Not sure about
this? Think of it this way: when a buyer is looking for a home online (as they
are doing more and more often), they put in their desired price range. If your
seller is looking to sell their house for $400,000, but lists it at $425,000 to
build in “negotiation room,” any potential buyers that search
in the $350k-$400k range won’t even know your listing is available, let alone
come see it!
One great way to see this is with
the chart below. The higher you price your home over its market value, the less
potential buyers will actually see your home when searching.
A better strategy would be to price it properly from
the beginning and bring in multiple offers. This forces these buyers to compete
against each other for the“right”to
purchase your house.
Look at it this way: if you only receive one offer,
you are set up in an adversarial position against the prospective buyer. If,
however, you have multiple offers, you have two or more buyers fighting to
please you. Which will result in a better selling situation?
The Price is Right
Great pricing comes down to truly understanding the
real estate dynamics in your neighborhood. Look for an agent that will take the
time to simply and effectively explain what is happening in the housing market
and how it applies to your home. You need an agent that will tell you what you
need to know rather than what you want to hear. This will put you in the best