When deciding on the pricing a home for sale there is no perfect science. The local MLS provides hard sales data to look at but every home is unique so making subjective comparisons to similar homes is extremely important. No homeowner or real estate agent knows about every nuance in the market. It's very difficult to know whether the perfect buyer is out there waiting or what interest there will be at a particular price without putting your home on the market and exposing it to all the motivated qualified buyers actively looking.
With years of attention and experience, watching hundreds of homes as they go on the market and either sell, sit or expire, we have put together the most common pricing strategies to help you determine how to best position your home and what reaction you can expect from potential buyers.
Strategy 1: Price high. (Risky)
The home is priced well above others in the market with similar characteristics and very few buyers view the property. If no one is coming to see your home, it could mean one of two things. 1. Buyers think your home is so overpriced that it isn't worth even seeing. 2. Buyers like the house and would love to view it buy it but are scared off by the price and subsequently talk themselves out of coming to see it.
Strategy 2: Price aggressively. (Could take a long period of time to sell if ever)
Many times buyers show interest in a wide number of homes when viewing properties for sale. Many will look at all homes on the market within a given price range to get a good idea about what they can afford and where. Homes they believe to be overpriced by comparison shopping get little interest or skipped all together. Most buyers need a home to be close to their budget or they will not even bother viewing it let alone writing an offer. If your home would be perfect except they need to get $100,000 off the price, they are going to wait for a price drop or just move on. Negotiating a large discount is rare so many agents will discourage their clients from writing offers when the pricing gap is large.
Strategy 3: Price at the high end of where the market indicates it will sell. (It could sell sell but may take some time and possible price reductions)
In many circumstances when pricing at the high end of fair market value it can take anywhere from a few weeks to a few months to get an offer in this price range. Motivated buyers may still write an offer if the house is unique or special in some way but may sill want to negotiate believing your price is on the higher end of fair market value. Many times, buyers wait a few weeks to see if there are better options or until there is more days on market and they have more power to negotiate.
Strategy 4: Price at fair market value. (Not too high not too low, will attract qualified buyers)
When homes are priced right magical things happen, you will quickly generate some buyer excitement and urgency to the listing. You may even get multiple offers in the first few days or weeks. A quick sale could happen, but most buyers will compete at or near the list price. There could be an appraisal or value concern if the price goes significantly higher, however there is the competing realization that the home may not be on the market very long.
Strategy 5: Priced bellow fair market value. (Priced to create an auction mentality)
When homes enter the market below fair market value they are sure to generate competition among buyers, even in down real estate markets. Pricing the home even 10% bellow the market will cause the market to correct the pricing and bring the price up to fair market value. Bidding wars are not uncommon in this price range and you may find yourself in the middle of one.
Summery: Home pricing can make a sale easy or hard.
Every home on the market can fit into one of these categories. It is up to the homeowner to work with their agent to develop a strategy that works for both the desired time frame and needs. It becomes quickly clear when you have priced your home wrong when other homes keep selling and you have no offers and few showings. To get a home sold successfully, pricing at or slightly below fair market value will get it done in the best amount of time with least amount of hassle and with the most money in your pocket. Pricing high is a huge waste of time and will inevitably lead to a less desirable final outcome as you continually drop your price to attract buyers that have already moved on.
Pricing a home is ultimately determined by the goals of the seller. Motivated sellers that are moving out of the area or trying to purchase another home are usually motivated for a quick sale, so pricing needs to reflect those goals. Sellers, who can afford to wait it out, may price it a bit higher and wait for that right buyer to write an offer. Just remember, if the wait getting long, the market is sending you a clear signal that you should adjust your pricing to be competitive.