This is generally the time of year when potential home sellers begin to think about putting their home on the market. Along with making plans for minor improvements and staging, sellers often wonder, “How do I decide on appropriate pricing for my home?”
Statistics show that overpriced homes remain on the market much longer, and the longer a house is on the market, the lower its eventual selling price is, relative to its asking price.
The most critical step in preparing to market a home is determining the right listing price. Of course, every seller, and every agent, shares a goal of getting the highest possible selling price for the home. That’s why it’s so important to strategically price initial listings for maximum results, and avoid the dangers of overpricing.
The right price produces the right return. Underpricing a listing may not bring the highest return, but neither will pricing a listing too high. And marketing strategy matters as well.
- When a price is too high, buyers will often bypass the listing, believing that it is out of their price range.
- Those who are looking in that price range may see the property, and deem it a poor value based on its competitors.
- Agents are often reluctant to show an overpriced property, except perhaps to make a competing one look better.
Sellers often ask me, “Can’t I test the market first at a higher price, then reduce if it doesn’t sell?” Many sellers are tempted to test a high initial listing price in the hopes of making an exceptional sale. While this may seem like a harmless, low risk tactic, it can be very detrimental to the sale of the property, actually driving the eventual sale price down instead of up. Why?
- Properties receive their greatest exposure in the first 21 days, when they are perceived as “fresh” to the market.
- Your best and most motivated buyers will likely see it during this initial period and reject the overpricing.
- Most buyers never return to see a home, even when the price is reduced; once they form an opinion of the home, it is view through the eyes of “not good value”, and agents have a hard time changing that first impression.
- In a declining market, your property will actually be going down in value during its listing period. In addition, appraisers penalize your property when it is on the market for an extended period of time, marking it as “declining value”, and making the appraisal process more difficult.
Seller action steps for pricing:
- Get a complete analysis of market conditions and comparable properties (CMA).
- Make sure your analysis includes the percentage of price sold (PPS) vs. listing price. Your Realtor® will have that data.
- Once you know the value of your home and the PPS, you must keep your asking price within that range in order to be competitive.
- Set a marketing plan that takes full advantage of your well priced home.
Have any questions? Feel free to call or contact us here at The Bremner Group.