When it comes to pricing a home, or lowering the price of a home eventually, there are some comments and ideas that owners come up with over and over. Let’s look at some of the most popular ones.
- 1. I’m in no rush so I’ll price it high. I can always lower the price in a few months
- 2. If I price it at $705,000, I’ll get $5000 more than if I price it at $700,000
- 3. If I price it at $699,000 or $699,999, they’ll think they’re getting a bargain
- 4. Very few people have seen it. Let’s get more showings before we reduce the price.
- 5. It’s only been on the market for 3 (4, 5, etc.) weeks...too soon to reduce the price.
- 6. Three people have made low-ball offers. We'll just wait for a serious offer.
- 7. But my broker told me this price...why should I have to lower it?
1. I’m in no rush so I’ll price it high. I can always lower the price in a few months
If you are not in a rush to sell, you are well advised to wait until you are ready to sell. Then put your property on the market at an appropriate price. Yes, you may be the one in a million who gets an Arabian prince eager to pay the initial high price. But, it is much more likely that your house will be a stale listing by the time you are really ready to sell in a few months. And, it is an established fact, that in the end, stale listings sell for less than properties that come on the market at an appropriate price to start with.
2. If I price it at $705,000, I’ll get $5000 more than if I price it at $700,000
You are probably expecting to negotiate. And, you are thinking that if you start $5,000 higher, you will be able to negotiate down to a price that is $5,000 higher. What you have not taken into account, is that people invariably do computer property searches by price ranges that end in round numbers. The human mind being what it is, they search from $600k to $700k, or from $550k to $600, etc. So, if you are priced just over the round number prices (the 50,000 or 100,000 mark), you won’t show up on any of the buyer searches that cut off at the round number. At $705,000 you will not be seen by all the people looking up to $700k. So, you’ll have fewer buyers looking at your property. In other words, that there will be less competition for your house, and you will likely get a lower price. But, at the round number, for example $700k, you will show up on the reports that cut off at $700k, and also the reports that start at $700k.
3. If I price it at $699,000 or $699,999, they’ll think they’re getting a bargain
You might think you are getting a bargain when you see a price that ends in a lot of nines. But the typical buyer – and the typical agent – think the owner who prices that way is going to be petty and difficult to deal with. If you haven’t gotten the idea yet, imagine a property that is priced at $699,999.99…in other words, one penny under $700k! When you price with a lot of 9’s, you are trying to play mind games with amounts that are less than pocket change. It doesn’t work with property that costs in the six or seven figures.
4. Very few people have seen it. Let’s get more showings before we reduce the price.
It depends on why hardly anyone has seen it. If it’s a slow market during the heat of August, you’re right. You can wait to reduce the price. But if the market is hot, and other properties are moving quickly, then you may well have a problem with price. Because, people can tell if it’s priced too high from just looking at the on-line listing. And if they don’t like what they see on-line, they won’t even bother looking at the property in person. Get the average ”time on market” for similar properties in the past few months. If you are out of line with that average time, you need a price reduction. Then people will start coming to look at it…and one of them will buy it!
5. It’s only been on the market for 3 (4, 5, etc.) weeks…too soon to reduce the price.
In the previous section, we discussed what it means if you’ve had very few showings during the time your property has been on the market. But, what if many people have seen it in a short time? Imagine that you’ve had 3 open houses and assorted private showings…a total of 93 different parties have seen the property. And, some of them have come back more than once. Yet, no one has made an offer.
Get statistics on the “average number of showings” for sales in the current market. If you are well above the average, you have a problem. For example: properties have been selling after an average of 20 showings, whereas 93 buyers have seen your property. The problem may – or may not – be price. It may be that the house has pet odors or needs a basic cleaning. It may be that there are signs of leaks, or other physical problems which need to be addressed and/or presented differently. But if the property is in good condition, and shows well, then it’s probably priced too high and needs to be reduced.
6. Three people have made low-ball offers. We’ll just wait for a serious offer.
Wake up and smell the coffee! The value of a property is, by definition, what people are willing to pay for it. And if three people are willing to pay only a lot less than your asking price, then your asking price is too high. Three low offers tell you loud and clear what people are willing to pay for it. One may be a fluke…two may be a coincidence…but three is certainly the market “talking” to you.
7. But my broker told me this price…why should I have to lower it?
First, your broker may have been wrong…everyone makes mistakes. Further, pricing is an art, and not every broker is really good at it. Or, your broker may have been desperate, and told you an inflated price in order to secure the listing.
On the other hand, your broker may be honest, and talented at pricing. But the market has actually dipped down in the very brief period since you listed your home. Interest rates may have gone up, the media may have been full of scary bad news, there could have been local floods or tornadoes, etc. On a micro level, three houses on your block, or two condos in your building may have come on the market in the past few weeks. And, not because of any real estate issues: one had to relocate for a job, one got divorced, and another had a baby. That creates a micro price war for your property. You have to look at the whole picture as it is today – not just the way it was a few weeks ago when your broker priced your property. So, it’s a good idea to get an updated pricing report, and decide whether or not a price reduction is in order, no matter what your broker told you originally.
When it comes to selling a property, time is usually not your friend. So, do it the right way from the start. It’s best to work with a very good broker who is talented in the art of pricing. Then, prepare the property and the on-line listing carefully. If your on-line photos are attractive, and the property itself looks and smells good, you will likely get an offer within the current averages for “days to offer” and “number of showings to offer”. But, if that doesn’t happen, look at the discussions above. And, if a price reduction is warranted – like pulling off a band-aid – do it quickly!
Chris Kostopoulos, who has experience and talent in the art of pricing, can be reached at 857-829-0282 or Chris@Isellmass.com