Price It Right the First Time

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The Internet has empowered all buyers with information and home buyers are no exception. The amount of information available to public includes details on size, (sometimes the theoretical) condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.

When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth.

If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price. It is a natural reaction for people to theorize that something must be wrong with a home that doesn’t sell in a reasonable time for that market.

The seller is entitled to maximize the equity in their home and pricing it properly in the beginning is the best way to achieve that. Overpricing can reduce the number of prospective buyers drawn to look at a property because they assume that the best homes are purchased soon after offered for sale and if one has been on the market longer than normal, there must be a problem with it. Similarly, sales associates may come to the same conclusion.

After buyers have seen a few homes in a certain price range, they begin to expect similar amenities in each home they look at. If a home is overpriced, it will not compare favorably with the other homes that are being viewed. Sometimes, the buyer may even conclude that another home is a relative bargain because it offers more for the same price as the overpriced listing. In other words, the overpriced listing contributes to its competition selling first, even though that buyer might very well have preferred the overpriced listing had its list price been reasonable.

Shopping the market means looking at the homes that meet a buyer’s wants and needs and selecting the one that gives them the most, whether it is in price or amenities. The overpriced listing doesn’t compete well, and it extends the market time. Professional experience teaches that the longer a home stays on the market, the lower the selling price is highly likely to be.

It is essential that a seller receive factual information to price their home to compete favorably in the current market. Some of the obstacles can include:

  • Failure to objectively compare the current and sold homes with theirs
  • Neighbors who misreport how much they got for their home
  • Fear of “leaving money on the table” and thinking they can start high and always lower the price
  • Rationalizing that a high price isn’t a deterrent since a buyer “can always make an offer”.
  • Loss of perspective because the seller is emotionally involved
  • Expecting the home to sell for more than fair market value because they need the money
  • Agents who will accept a listing at any price in order to tie up the property until the seller realizes the price is too high

What a seller paid for the home or the cost to rebuild it today do not affect market value. Neither does the amount spent by sellers on certain improvements that were made for their own pleasure and enjoyment. Even two homes on the same block of nearly identical size and construction quality can have remarkably different levels of market appeal due to differences between the floor plans, design features, updates or the lack of updates, lot characteristics, etc.

It is unrealistic to expect a buyer to pay more than market value for a home. The seller sets the price of a home but the buyer determines the value. If the home is priced properly in the beginning, it is more likely to sell for a higher price, after fewer days on the market and get from purchase contract to closing on a smoother road.

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