Pricing My Home in a Seller’s Market
Pricing my home in a Seller’s Market is a topic we hear a lot right now. It can be a challenge. What strategy are you going to use?
Ever compared Auction vs Yard Sale pricing? They are two totally different styles and both are appropriate for their events. However, when you are considering what price to sell your home for, there are definite differences in the mindset and results of using each strategy.
Which do you think will get you the results you want?
Pricing is an art and a science meaning, you have to take real world data into consideration but some of that data is also subjective – depending on who is doing the analyzing.
Real estate agents, appraisers and home sellers all have their own ideas when it comes to pricing a home. Let’s take a look at the two main mindsets…
Yard Sale Style Pricing
As sellers, we want to get the most for our products – in real estate, that product is your home.
It’s best when the condition of your home matches the price you are asking when compared to the rest of the active, pending and recently sold homes in your area.
The human response is that you need to ask a little more in price than what your home is worth so you have negotiating room. However, there is a major flaw with this thinking when pricing your home in a Seller’s Market.
Sellers want negotiating room so they price a little high. This is what I like to call “Yard Sale Pricing.”
We’ve all been to a yard sale, tag sale or garage sale and seen people ask the seller/owner if they will take $XX (instead of what’s marked on it.)
Yard sale hosts know that buyers are looking for a bargain, so they make sure they price on the high side so they have room to come down to what the buyer is willing to pay.
Both parties see the value and are happy with the end result, most of the time.
However, pricing your home with this mindset is a bit different and can be risky, especially in a seller’s market…
Consequences of Over Pricing Your Home
We live in a world where we can find information easily – the internet has given us access to so much in the last 10 to 15 years!
Buyers and their agents can easily find out what other homes in your area are priced at and have sold at recently. Armed with this information, they decide what your home is worth.
When you “leave room for negotiation” by overpricing, it can affect a couple of different things:
- It may mean you are pricing your home out of the reach of some of the buyer pool out there.
For instance, if your home’s market value is between $200,000 and $205,000 but you push the price up to $210,000, you’ve just lost out on the buyer’s whose cap is up to $209K. They won’t even see it in their searches.
- If the condition of your home doesn’t match other homes in the area who’ve sold in that price range, they will skip over it and move on to the next one.
The bottom line is that buyers know when your home is overpriced in comparison to the rest of the market. They assume you are greedy, just trying to get away with it or hope the buyers are uneducated.
A lot of them won’t even bother to make an offer, feeling like they don’t want to get into a transaction with a seller who is unreasonable.
Resulting in:
- Longer Days on Market and higher carrying costs
- Property Being Stigmatized by the public (What’s wrong with it?)
- Accepting a price lower than actual value
Auction Style Pricing
When the situation allows, I tell my sellers about what I call the “Auction Style Strategy” in a Seller’s Market.
Think about it… at an auction, the auctioneer usually starts the bidding just below the value of the item in hopes of generating a sense of value/bargain with the buyer pool. Then, emotions take over and the price goes up!
It can have a similar effect when selling your home…
Pricing at or just below what the market tells us the value is can result in:
- Lots of buyer interest
- A lot of showings
- Multiple offers
When you price this way, buyers see the VALUE right away! This creates lots of interest.
Buyers also get a sense of urgency to make an offer and get it accepted since there is so much competition! They typically make their offers as attractive as they can for the seller in order to stand out among the crowd. They want to win!
Pricing Your Home in a Seller’s Market – Your Decision
Obviously, there is no guarantee but if the condition, location and demand in your area is all there, this strategy is a great option.
I have seen other agents use this type of pricing but go too low on the listing price. That resulted in a buyer’s mindset of “what’s wrong with it?” and “Why so underpriced?” rather than seeing value and a bargain.
It’s a balancing act, for sure. Pricing too far above or below the actual fair market value and you run a risk. Having some guidance and using actual data from the local market are key to getting it right!
