Pricing Your Property Is A Balancing Act
Pricing your home unrealistically high does NOT mean you will get the highest price for your home. On the contrary, pricing your home too high typically means you end up selling it for LESS!
Pricing your home is a balancing act. On the one hand, you want to set a listing price that maximizes interest among qualified, motivated buyers who will be willing to pay top dollar for your property. Indeed, such buyers will ultimately determine your property’s top market value.
On the other hand, you do not want to set a listing price that attracts a lot of buyer prospects, but sets the stage for negotiations that result in your getting less than what your property is really worth.
In a perfect world, your home’s value would be everything you think and need it to be. However, simply put, your home’s value is not determined by you, but by what the market is willing to pay for it at a given time. These days, the “market” increasingly refers to home buyers who have researched property values over the Internet for months, have already viewed a number of homes, and are not under any undue pressure to buy.
You can determine a value range for your home by looking at the recent sale prices and current asking prices of homes similar to yours in your area. That is why I will prepare a Comparative Market Analysis (CMA) for you that includes a variety of “comparable” homes drawn from the OKC Metro Multiple Listing Service (MLS).
You can also use the link below to look up comparable home prices using the county tax records of recent sales in your area.
The Bottom Line: REALISTIC IS STRATEGIC!
On average, serious buyers look at about fifteen properties before they make an offer. Doing so gives them a basis for determining how competitively a property is priced, both in terms of the market generally and what they are looking for specifically.
If you overprice your property you’ll usually lose serious buyers even if they otherwise love it. Experience shows that buyers usually do not make what they consider to be realistic offers on overpriced properties because they assume that doing so will just be a waste of time. The overlap between buyer and seller price ranges is depicted below. It will be helpful to keep this diagram in mind when pricing your property.
Your Home’s Optimum Time-On-Market
General definitions of market value usually say that it is the price a home should sell for when it has been on the market for anywhere from three weeks to two months.
However, if you want top dollar for your home, experience shows that you should try to get and accept a solid offer sometime during the third to fifth weeks that it’s on the market. It is during this three-week “window” that your home will enjoy maximum market exposure and buyer interest.
Beyond five weeks your home will increasingly be viewed as a “stale” listing — i.e. as a commodity with a history of being rejected by other buyers. Consequently, there will be less interest, less showings, less offers and less likelihood that you’ll get your asking price.
This is why it is crucial that your home be priced correctly during the three-week window.
How you price your home will directly impact how many buyers, showings and offers you attract, and ultimately to how easily it sells. At the pyramid’s center is the fair market value at which a reasonable percentage of buyers would view and purchase your home. When you underprice your home you’ll attract a greater percentage of buyers, and when you overprice it you’ll attract a lesser percentage of buyers.
Consequences of Overpricing
The strategy of overpricing your property — knowing that you can reduce the price later — might make sense at first glance. However, it seldom works. In fact, sellers who overprice their properties — even just 10% above market value — often end up getting less than they would if they had priced it properly from the start.
Here is why:
- A high price on your property makes other comparable properties more attractive, so you actually help to sell your competition.
- Fewer buyers will respond to ads, fewer agents will show your property to their buyer clients, and you’ll get fewer serious offers.
- Inflated prices often lead to mortgage rejections and critical lost time waiting for finance approvals that don’t go through.
- Reducing the price after buyers have begun to perceive your home as a “stale” listing will not generate nearly as much interest as if you’d priced it properly from the start.
This is why correctly pricing your property to coincide with its window of maximum market exposure and buyer interest is so important.