I taught a class yesterday morning which prompted a nice little debate between a newer agent and myself. I was explaining the importance of pricing listings in today's market. My platform was basically if your home is not priced competitively in the beginning, which means sometimes pricing it lower than the competition to make it look attractive to buyers, then plan on being on the market a long time. She said she has a listing that is priced correctly but is still not selling. This listing has been reduced 3 times and has been on the market for over 6 months. She says that the home is priced right and is in line with the other homes currently on the market. I told her it's obvious the market is telling her the asking price is still too high. She responded with, "But the other other homes are priced just as high as well." My response, "And they're not selling either so you need to drop the price to where buyers will perceive your listing as valuable." This new agent asked if we are truly representing our clients' best interests if we recommend a "low price" just to get the home sold. That's a great point and here is my answer. If an agent does their research and can accurately communicate market stats with their client then a real asking price will present itself and that price might be lower than what they are wanting for the home. But remember the goal is the sell the home for the highest price in the quickest amount of time. For example, if there are 5 similar homes on the market priced from $230K to $265K and they are comparable to your home and you want to get $275K for yours what is your initial reaction? They have no chance. If it's priced any higher than $249,000 then that listing is probably going to be on the market for a while. This is the Realtor's job to explain to their clients this is not a time to test the market. Buyers are tentative to pay market value for a home much less overpay. And if a home has been on the market for 8 months vs. 30 days which home will probably get closer to their asking price? This is what Realtors need to be telling their sellers.
If a buyer does not see your asking price as a good value they will simply pass it buy without a second look. I don't care if you have the nicest updates in the neighborhood. If you are not priced correctly they will not "make an offer". This is the hardest thing for sellers to understand. They say to themselves, "Yeah I know we're priced a little high but we want some room for negotiations. Why don't they just make an offer?" I know this sounds familiar to many of you. So what's the answer? Why don't buyers just "make an offer"? The answer is because they are smarter than sellers give them credit for. They haven't just seen your home. They've probably seen 15 to 20 homes in your general area and your home is being judged just as harshly as the others. If most of the homes in your area are selling around $250,000 and you are priced at $275,000 or $299,000 then buyers see you as an unrealistic seller and why waste their time?
This article reiterates this new philosophy in pricing your home to maximize dollar value and minimize time on the market.
“I show them the neighborhood and we look at what other houses are for sale,” said Page, a Realtor for REMAX Property Source in Rockford. “Then we would sit down and look at the prices those homes are listed for and I’d tell them, ‘Yours has to be better.'...With so many houses on the market, you have to price it aggressively so that yours is the one that jumps out at them.”So make sure your Realtor shows you in depth sales statistics for your neighborhood and also make sure you're not the highest priced house in the neighborhood unless you are willing to have your house on the market for the long term. But in the end you won't sell your home for what you might have sold it for had you priced it right in the beginning.