For those of you thinking about selling, it is important to realize how vital the Art of Pricing is to the sale of your home.
All sellers want the highest price possible for their homes, and believe me, I want that for all of my clients as well, but the strategies to get there are not always intuitive. In certain circumstances, pricing low can be more effective than pricing high, while in others, pricing above market value can be a winning strategy. In most cases, however, the optimum pricing strategy is to price within 10% of market value and let the market decide. After all, the ‘list price' comes with a caveat: Or Best Offer.
Top Reasons for NOT Pricing High:
- You lose out on potential buyers who put a price cap on their property searches
- Serious buyers question the motivation of a seller with an overpriced listing.
- You provide a strong comparable for your neighbours who are properly priced- You are effectively selling other people's well-priced homes.
- Buyers assume that properties which remain on the market for long periods of time have something inherently wrong with them.
- Other agents will be more hesitant to show your home.
In a quickly rising market, pricing strategies tend to matter less, as underpriced listings are bid up to market value and overpriced listings simply wait until the market catches up to them. However, in flat or falling markets, pricing plays a pivotal role in how much you may ultimately sell your house for.
In a flat market, buyers have more time to analyze the market and therefore become more educated about value. Houses that are overpriced will simply sit on the market, as well-priced new listings come on to replace well-priced recently sold listings.
In a falling market, the optimal pricing strategy is actually to price slightly BELOW market value. A simple exercise that pricing experts like to use in this situation is to visualize catching a fly ball. The ball represents the market and your glove represents your pricing strategy. If you price too high, the glove will simply swing across where the ball was. If you price at market, there's a good chance you will miss it. But if you price just below market value, there's a greater likelihood of catching the ball. After all, it's better to take a little bit less than to risk having the ball drop in for a double.