When it comes time to sell your home, the single most important decision a homeowner will make is to determine the listing price of the home. Sellers get lots of different input from various sources, so coming up with the right number can be a challenge. It helps to be open to feedback from your Realtor, who has experience helping sellers determine the best listing prices. Together you can craft an effective pricing strategy.
While Realtors sell homes for a living, it doesn’t mean they are guaranteed to be right when it comes to the price. Realtors also need to be open minded with their sellers and listen to why they believe the number they are considering is the best one. Sometimes it can be pretty cut and dried, especially when a homeowner says they won’t sell their home for any less than ‘X’. The seller’s axiom is, “If I can’t get that price, I’ll rent it.” If that’s the case, it becomes a judgement call. Do you start at that number, or do you start a little higher to give yourself some negotiating room? Depending on the market conditions it can be a good idea good to start a little higher, and if it doesn’t sell then lower the price to the ‘bottom line’.
My general rule is not to price a home 10% over what I believe the true market value of the home will be. If a seller wants to be a little high, I can work with that. Over 10% things start to get sketchy, as in, will I be able to sell this home? Overpriced homes can end up sitting on the market for months with few showings and as time goes on the buyers that do step forward will make low ball offers. It’s not unusual for a seller to be ‘insulted’ by low offers. They shouldn’t be. It’s nothing personal, even though a house is a very personal thing. A home sale is still a business transaction.
My preference is to price a property at it’s market value, or slightly under that number. When you start a little bit low you can generate more interest, more offers, and ultimately a higher price. This strategy has been particularly effective in today’s low-inventory, high-demand sellers market. It’s how we generate multiple offers, because when a buyer who really wants a house is competing against other buyers, they will often pull out all the stops to get the home they become dead set on. Often those buyers will have missed out on several other homes in competitive situations, and they finally realize how much higher they’ll need to go to beat everyone else out and get the house.
If you come out at a price that is too high you’ll most likely need to consider a reduction price strategy. Sometimes agents and sellers will come up with the strategy in advance, and commit to lowing the price after the first 14-30 days. That is something I’ve done, and there’s been times when I’ve held off on lowering the price because of serious buyer activity. It’s paid off on several homes too, where we didn’t lower the price and we got the offer that the seller really wanted. At some point it’s a judgement call. Do you keep waiting and holding out hope or do you lower the price? That’s where you need to trust in your Realtor’s experience and let them be your guide. Ultimately they have a fiduciary duty to get you the most money for your home.