4 Pricing Mistakes to Avoid When Selling a Home
By Sam Ghaemi, Purplebricks REALTOR ® | May 24, 2019
I’ll never forget the words of my instructor during my first real estate class over a decade ago: “Over 80% of marketing is pricing the home right.”
Marketing and technology have certainly changed considerably since that day, but that makes the truism stated above even more relevant. After all, in a digital age where home information can be readily found online, buyers can quickly look up recent sales and current homes for sale in your neighborhood and come to their own conclusions regarding your home’s market value.
Price your home too low, and you may not recoup all of the precious equity you’ve built over time. Conversely, if there is another similar home available in your neighborhood priced for a lot less, a buyer may not even consider your home worth a look, and you could miss out on a sale altogether.
I’ve studied the market for some time and watched many homes sell while others sit on the market. Here are four of the most common pricing mistakes I’ve witnessed that can hinder your ability to sell faster, and for the best price:
1. Your initial price is too high.
Thanks to online listing sites, today’s home buyer is aware of everything coming to market. Not only do they know all the facts and figures associated with a given home, but they have also likely seen photos, videos and virtual tours of your competition, and can discover what’s recently sold in your area and for how much. That said, if your home is priced higher than the rest of the market dictates it should be, no one is going to come see your home. And it’s not going to sell easily.
In fact, studies have shown that pricing too high at the beginning can cost you thousands of dollars in the end. That’s because when your home sits for longer than you want it to, you will likely be forced to adjust the price down. By then, your home will have developed a stigma. Potential buyers may wonder, ‘What’s wrong with that place if it’s not selling?’ Not wanting to buy a home with what they erroneously presume to be hidden issues, buyers will become wary and choose not to make an offer. Again.
… and the cycle continues.
If you want to sell quickly and for the best price, it’s essential to get the magic number right from day one. This will inspire more activity on your home which will likely net you a more lucrative sale.
2. Your price is misleading.
These days, buyers see a lot of list prices online that end in $900 instead of rounding up to the nearest thousand. (Ex: $499,900, not $500,000). Applying popular consumer psychology, these sellers are trying to make buyers feel as if they are paying considerably less for the home in question, when really it’s just a difference of $100.
In today’s internet-savvy world, this isn’t the greatest idea. More than 90% of buyers search for homes online, and they usually enter their search criteria as a range of rounded numbers. So, if your home is priced at $549,900 and buyers enter their search criteria as $550,000 to $700,000, your home won’t even be seen!
For this reason, you’ll want to make yourself aware of how buyers search for homes on the internet. Learn the ranges and price accordingly to make sure your home is seen by the most potential buyers online.
3. You’re not paying attention to the market.
Pricing your home has a lot to do with whether it’s a “normal market,” a “buyer’s market” or a “seller’s market,” as this is an indication of whether prices are moving up or down. What’s defined as “normal” in your area may vary, so be sure to consult your real estate agent to understand your local market before pricing your home. That said, here are a few typical characteristics of these three markets you may encounter:
In a “normal market,” homes usually sell within 6 months. Pricing in this market should be decided by considering other recent sales. After all, this is what appraisals will be based on. In a normal market, a buyer won’t be paying over appraisal price. Also, in this type of market, a buyer isn’t likely to receive a mortgage to purchase a home that is priced above its appraisal.
In a “seller’s market,” prices are appreciating. So you will often see homes selling for prices just above those of the most recent comparable sold properties. So, price your home based on what your current competition is priced while keeping an eye on recent sales.
In a “buyer’s market,” prices are depreciating. The best way to sell in a true buyer’s market is to price your home ahead of the declining sales price. This way, you’re more likely to be the next one to sell, and are more likely to sell closer to your list price. If you price your home too high in a buyer’s market, your home may sit on the market for longer than you’d planned, and you may have to reduce your price multiple times. In this scenario, you could end up selling for a lot lower than if you’d priced your home more strategically at the beginning.
4. You’re not negotiating enough.
Everyone wants to receive the best deal for a home. That’s why, no matter the market, buyers will want to negotiate.
Negotiation is completely normal and even expected during a typical real estate transaction, so try not to look at the first offer as an insult. Instead, view it as a buyer expressing interest in your home.
Always respond, especially if the buyer has written you a personal letter and / or provided a market analysis showing their rationale. This is a buyer who has invested time and effort into their offer, and they are likely more serious than someone just throwing a number out to see if you’ll bite.
Sometimes, however, the buyer is just fishing around for the best deal. If you sense this, there’s no reason to entertain this buyer’s offer. Respond “no thanks,” and move on.
The bottom line? In order to get the best price for your home, you want someone who falls in love, not someone just looking for a deal. But you likely won’t know what type of buyer you’re dealing with until you have gone through at least the first round of negotiations. So be patient, use your instincts and consult your agent for advice at every step. Experienced REALTORS ® are ready and willing to negotiate on your behalf, so don’t be shy!
Our Two Cents
Did you know the average homeowner buys or sells a property every six to seven years? True story! Yet, real estate agents buy and sell homes on behalf of their customers every day. It pays to consult an agent: Schedule a free, no-obligation consultation with a Purplebricks REALTOR ® today, and we’ll advise you on how to price your home — no strings attached.
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