- Last Updated on Thursday, 29 June 2017 16:37
By Roger Dolanch - Broker/Owner
There is a difference between pricing a home to sell and “testing the market” to see if the property will sell for more than it may be worth. Pricing a property emotionally or without any supportive market evidence may result in a property sitting on the market with no showings or even any offers.
Most homebuyers typically want to spend less to get more while most sellers typically want to sell for the highest possible price. Every real estate professional knows that determining the list price of a home is an art and not a science. There is no precise formula that magically sees into the future to know with absolute certainty what the ultimate sale price of a particular property will be.
Determining the best possible list price is the result of objective research of similar properties, general knowledge of the marketplace and well-honed professional instincts to determine how much a buyer would be willing to pay. A reasonable list price will attract buyers, result in showings, and generate offers.
Consider that a homebuyer’s price range is often limited by their budgetary constraints. A buyer who is wise enough to get pre-approved and knows their “purchase power” limitations tends to search for properties within the realm of possibility. Price remains the primary factor homebuyers use to select which homes they want to view. If a property is priced too high it will not even show up on the radar of the “right” qualified buyers.
Buyers become very knowledgeable about the pricing of properties available in their price range because of technology, ads and signage. What began months or years ago as a dream becomes practically a daily routine as they continue to search and self-educate. The closer they get to their ultimate selection, the less likely they are to consider anything they cannot afford.
Appropriate pricing will result in a quicker sale with less inconvenience to the seller. After all, just keeping the property in showing condition at all times can be tiresome. The lower the price, statistically the larger the pool of potential buyers. This translates into the possibility of multiple offers that can drive the reasonably priced property to sell for closer to or even above list price.
The most common reasons we encounter for overpricing a property are that the property was over-improved for the area, the original purchase price was over market value, or the sellers’ desire negotiating room. These are the real pitfalls of overpricing:
- Most of the activity will occur in the first few weeks, sometimes even the first day! Pricing a home properly creates immediate urgency in the minds of buyers and their agents.
- There is a large pool of potential buyers who have seen most available homes in their price range and are now only waiting for new listings or price reductions. A buyer that has been waiting may fail to see a new listing for a property if it is overpriced.
- Oftentimes, a price reduction may be too late as interest by both buyers and REALTORS® may have waned.
- Buyers and their agents are very aware of the length of time properties remain on the market. Often buyers are reluctant to make an offer on a home that has been on the market for any length of time, thinking that there is something wrong with the home.
- Unfortunately, overpriced listings frequently help to sell a competing but more reasonably priced home by making that home appear to be a better value by comparison.
The role of the real estate agent in pricing is to provide the seller with a competitive market analysis. Together, a seller, with the help of a professional REALTOR®, will be able to arrive at a saleable list price.