Approaching the end of June 2022, we all know the market entering the second half of the year is not in the same shape as it was when the year began. Interest rates have skyrocketed, which has weeded out a lot of buyers. There still appears to be enough buyers for the limited inventory that continues to trickle on the market. When sellers put their homes up for sale, they are faced with the classic strategic choices: price under, at, or above the market value.
While it was a great strategy throughout the first half of the year, pricing under the market value and expecting multiple offers may no longer be the best approach. I used this approach on 394 Holly Drive in Terra Linda, got five offers and we went $400,000 over our asking price. On 516 Whitewood Drive I received multiple offers and we went $150,000 over. I also got $100,000 over the asking price with listings, in both Napa and Rohnert Park. Pricing for multiple offers was a very viable strategy in the North Bay in the first half of 2022.
Times have changed though, and most recently in June I closed at the asking price of $1,349,000 on 530 Las Colindas Road. Even in May, I felt like the market was shifting and we ended up virtually at our asking price on 632 Tanbark Terrace. The thing that both of these houses had in common was that they needed a substantial amount of work. It seems that anything that needs work is going to need to be priced near or below the perceived market value in order to attract an acceptable offer. Don’t even think about overpricing these homes. Buyers are no longer going to overlook big ticket repair items, and will take them into account when making their offers.
The danger in underpricing of course is receiving only one offer at your asking price and the seller not accepting it. I never advise pricing under what a seller will accept because it can be very difficult to negotiate prices over the listed price, especially when you attract only one offer. Worse yet, what happens if you come on the market and receive no offer at all? It’s not like you can raise the price and expect to get more interest. That only works in a super-hot market, and we seem to be cooling down in the heat of the summer.
The only time I think over-pricing is a good way to go is before you come on the market and want to ‘test’ the price. I network within my office, the brokerage, and with local Realtors outside my brokerage when testing prices. I often sell homes off the market. Occasionally sellers will expect a premium for not putting the house on the market, but most of the time these sales are done at a fair market value. Personally, I’m not a fan of over-pricing.
At least for the next quarter, I believe pricing at market value will be the best strategic choice for most sellers. If a seller gets over that with multiple offers that will be great! If not, then they will hopefully get an acceptable offer at their asking price. There is a possibility we may see pricing deteriorate somewhat in the coming months, especially with the condo market where interest rate hikes have hit first time home buyers the hardest. Buyers shouldn’t hold their breath for big downward shifts in the single family home market though. As long as inventory remains sparse, buyers will need to keep paying the sellers’ asking prices.