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.”
Sellers 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.
John Knight, recipient
of the University Distinguished Faculty Awardfrom 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.”
Additionally, 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.
Many sellers 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.
Let's get together to discuss what is happening in the housing market and
how it applies to your home.
You can always reach me @ 313 999-8900
If you like my blog posts, it would mean the world to me if you
shared it with your friends.
Patrice M Miller
Realtor/Associate Broker
ReMax Innovation
313 999-8900 Cell
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