Why an Accurate Pricing Strategy is Crucial to Success
There are many factors that go into developing an accurate pricing strategy. There are also consequences for mis-pricing your home. You don’t want to under-price it and give your equity away but you also don’t want to overprice it and lose the chance of selling it.
Benefits of Accurate Pricing
Dangers of Mis-pricing
More buyers and more Realtors will view and become excited about a home which is priced right.
If a home is priced right, the excitement of the market often produces a higher sales price. Buyers are less likely to make low offers out of fear of losing a good home at a fair price. In fact, there may be several simultaneous offers when the price is right. With more offers, you will be able to choose the best offer with the strongest buyer instead of compromising.
The excitement is highest during the first couple of weeks a home is on the market. In essence, there is a “window of opportunity” where all the Realtors and active Buyers in the market are excited to see your “new” listing. If your home is overpriced during this critical window, it is difficult to generate that excitement again and you need to wait for new buyers to enter the market.
The perception once a home has been on the market for a period of time is that no one else wants it, (something must be wrong!) It becomes “stale.” Just like merchandise on a rack at a department store which has been looked over, buyers expect to pay less.
Less time on the market means fewer showings, fewer adjustments to your lifestyle, and a faster sale.
When a home is priced in the wrong price range, buyers refuse to make offers. Many do not even see it to begin with. With the Internet, all buyers view numerous homes prior to making a purchase. If your home is competitive in style, features, condition, and location with other homes in a certain price range, the right buyers see it and they will make an offer.
Starting out high to test the market and then periodically reducing the price causes a property to become stale. By the time a home is finally reduced to the true market value it may be too aged to attract a full-price offer. Have you ever asked how long a property was on the market? If it had been quite some time, what conclusion did you draw?
It’s a simple fact that homes priced above the going market take longer to sell. In fact, if you price your home too far above the market value, no amount of exposure and time will sell it. The greatest risk of mis-pricing your property is that it will not sell at all.
Invalid Pricing Factors
These factors are not valid criteria for setting an accurate pricing strategy.
An owner’s need for money does not increase the value of the property. Your need to pay off the credit cards, cover a home equity line, or even pay for a college education will not influence what a buyer is willing to pay for a home such as yours within your neighborhood. Buyers simply won’t pay more than similar homes in your neighborhod.
Improvements should be made for enjoyment, not just for resale value. You cannot add an item to your home, use it, and then expect the buyer to pay full price for it. Repairs are a normal part of home ownership. Replacing a roof or putting in new carpet simply returns the home up to normal expectations.
Prices are greatly influenced by location and demand. The exact same home is going to sell for much higher in Beverly Hills than Provo. Just because you are moving to a higher priced area doesn’t make your existing home worth more.
Some agents will quote a higher listing prices just to get your business, then try to “work you down” over the next several weeks. Your pricing strategy should be based on market facts, not emotions. The bottom line, a mis-priced property will not sell.