Price to Sell, NOT to Negotiate

In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges we 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, I believe that it’s always best to tell the homeowner the truth…this is more important than getting the seller to “like me”, because I’m there to try to help them sell a house! Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.”  But this is important to remember: there is no “later”.

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 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 the their price. In 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.Price & Visibility | Keeping Current Matters

The best strategy is to price your house 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 not in as much of a “power position” with the one prospective buyer as you are when you have multiple offers. When 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 possible position.  Questions? Comments?  Get in touch with me…I’m here to help with any of your real estate needs!

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