Pricing your home correctly has always been important, but in today’s market it is more important than ever.
Sellers, understandably, want to get the highest price they can for their house and often make the mistake of overpricing their house in an effort to do this. “Let’s try this price first and see what happens,” they say, not realizing this choice might actually cause them to get a lower price than the house is worth.
The first thing that sellers need to understand is that buyers probably know more about the value of houses in the area than sellers do. Why? Because buyers are out there every weekend looking at houses. The second thing that sellers need to understand is that a buyer is not going to waste their time on a house that they feel is over-priced. Why? Because they assume that the seller of a house that is newly listed is not going to be willing to lower their list price. Buyers won’t waste precious time viewing an overpriced home, let alone putting an offer on it.
The seller starts to wonder why buyers aren’t looking at their house; they have no buyer traffic. Hopefully the seller realizes their house is overpriced, and they lower the list price to market value, but now the house has been on the market for a while, and buyers know this.
The longer a house stays on the market, the more value it will lose for a number of reasons. First, buyers and their agents will ask themselves why this house hasn’t sold yet when all the others in the neighborhood have gone under contract. They walk into the house looking for something wrong to explain the longer DOM'”Days On Market'”rather than hoping they’ll love it. Second, when a house stays on the market too long, a certain psychology kicks in. Sellers often get anxious and become more willing to negotiate, and buyers know this. Also, buyers assume that since no others offers have been made, the house is not worth what it is listed for'”even if the price has been lowered. The bottom line: a buyer is not going to offer close to list price because they know they don’t have to. “The house has been sitting here for this long,” they think, “so I’m not going to offer anywhere close to list price.”
Let’s look at this in terms of actual numbers.
Mary’s and Joe’s Realtor suggests they list their home for $500,000 based on recent sales in the neighborhood. That’s the price Mary and Joe are looking for, but assuming a buyer will not offer full price, they decide to list the home for $525,000 in order to get as close to $500,000 as possible.
On the other side of the neighborhood, Lisa and Ted have listed a comparable home for $500,000. Buyers visit both homes, love both homes for different reasons, but they decide to put an offer on Lisa’s and Ted’s. The buyers have been looking in this neighborhood for many months and know that both homes are worth about $500,000, but they don’t feel that Mary and Joe would accept $25,000 less than their asking price'”especially since they just put the house on the market.
Lisa’s and Ted’s house goes under contract by the end of the weekend. Mary and Joe wait until the next weekend to see how many buyers view their home. Not as many buyers come through their home on the second weekend. By the time Mary and Joe realize they need to lower their price to $500,000, their home has been on the market for 3 weeks. By the time they finally get an offer, it is well below the $495,000 offer that Lisa and Ted received.
In today’s market, the very best way to maximize the selling price of your home is to price it correctly from the very beginning.
I blog about real estate and life in Northern Virginia at MargieMac.com.