Back in the day, it was standard practice to price a home a little on the high side to “allow room for negotiation”. For so many reasons, that's not a good idea anymore!
First and foremost, correct pricing allows you to plan your next move with a realistic idea of what you will yield from your sale. No matter where you’re going, buy or rent, knowing how much money you can expect from your sale is key. The agent who over-prices your home to win your listing is doing you a major disservice.
Imagine planning to purchase another home and finding out too late that your proceeds of sale fall short of the funds required – bad news for all concerned!
In today’s internet-driven marketplace, buyers look in pre-set increments on consumer websites such as Zillow, Trulia, and realtor.com - for example “$300,000 to $325,000”. If their budget is under $325,000 and you are priced at $329,000, they will never even know you’re out there!
Good realtors encourage buyers to look within their price range since it can be disappointing to adjust your expectations downward if you fall in love with a home you can’t afford to buy. Good realtors also teach their buyers that homes that are “correctly” priced will sell quickly – which means buyers aren’t always expecting to pay much under asking price.
So what if you’re the seller who can “wait for their price”? There's no such thing anymore!
The longer your home is on the market, the less desirable it appears to the buyers. Their thoughts go from “Wow! What do I have to do to get this house?” to “Wonder what’s wrong with it that it’s been on the market this long…?” More than 80% of buyers look for homes online - and the consumer websites all show “days on market”. Good realtors know what average days on market are in your community at your price range.
Over-priced homes pay a penalty in other ways. Your “optimistically-priced” home will help your correctly-priced neighbor’s home sell faster because it looks like a bargain. Furthermore, the sale of a lower-priced competing property may affect your home’s appraised value, potentially making it tough for your buyer to get a mortgage.
If you’re interviewing realtors, ask them their initial LIST price to SOLD price ratio. Ask to see copies of closed listings and check references to see if the seller and agent relationship was one long clash over price reductions. Agents over-price out of inexperience – but also to “win the listing”. Don’t fall into that trap – price reductions are NOT a marketing strategy!