How to Price Your Home Just Right
Pricing a home for sale is an art vs. a science. If priced competitively from the beginning, a home will sell at the higher end of its value range. The longer it lingers, the lower it lands in that range. In fact, homes that linger on the market tend to sell for a lot less than their listing price. Here’s how to price your home—and avoid the costly mistake of overpricing it.
1. Don’t assume your agent wants to price low for a quick sale
Homeowners have a limited perspective on the real estate market, as they’re only concerned with one home: theirs. On the other hand, successful agents live and breathe their local markets daily. They possess a deep understanding of current market conditions because they work with buyers, tour homes, and have first-hand knowledge of what moves (and what doesn’t).
Because sellers have limited knowledge, they sometimes over-value their homes. They may assume the agent just wants to price their home low for a quick sale. And so, a friction begins.
But agents know homes that are priced right and show well will sell in good times—and bad.
2. Make your home attractive from the start—or risk having to make a price reduction later
The market typically responds to a new listing in the first few weeks. So it’s important to do whatever you can to make it attractive to buyers right from the start. Price your home right. Take your agent’s advice about cleaning, de-cluttering, painting and prepping. If you do, your home should sell without incident and for top dollar.
On the other hand, listing at the wrong price, or with the home not in its best showing condition, and you’ll give a poor first impression to the market. As time passes, a listing loses momentum as newer, more competitive homes come on the market. As the number of days on the market increases, interest in your home decreases, and the listing becomes stale.
A price reduction inevitably occurs after weeks or months of inactivity. If the seller doesn’t price the home within striking distance (say, 5 percent in many markets) of what the buyer perceives the value to be at the time, the seller has to come down in price. Often, they will make a reduction in price, but it’s still not enough.
If the sellers miss the market twice, buyers won’t take them seriously and will wait around for the next reduction.
The home will eventually get into the right price range for the market, and a buyer will strike. But they will probably punish the seller by coming in with an offer far lower than they would have if the home had been priced right from the beginning. Once sellers lose the momentum of being new on the market, they’re at a disadvantage when it comes to negotiating.
3. Don’t risk a change in the market
Markets can decline over time. A seller may list in March in a healthy market, but their odds of making a top-dollar sale fall as inventory piles up, the economy slows, interest rates rise, or any number of factors come into play. Come September, the value range of the home is lower than it was in March. A change in market conditions is a risk a seller takes by pricing too high.
4. As your home sits on the market, weeds grow
As time passes, sellers may get lazy, and keeping the house clean and organized becomes an ongoing, tiresome chore. Weeds come back, dust bunnies pile up, and the house doesn’t show as well as it did when it first went on the market months ago. Buyers who show up when the price is finally right will have even more reason to penalize the seller with a low offer.
5. Take pricing seriously from the start
If you’re serious about selling your home and have a game plan and motivation to move on, take your pricing strategy seriously.
If you and your agent disagree about the price, but not by a lot, it’s worth trying the higher number. But have an upfront plan to reduce the price quickly and use that price reduction as a marketing activity.