What is the best strategy when it comes to determining a listing price for my home?
This is a question that comes up a lot and for good reason. Statistics show that a listed house gets the most attention in the first couple of weeks it hits the market so it is important to price correctly from the start as that is when it will be seen by the largest percentage of buyers. We, as realtors® also see this first hand when we list houses as we get statistics on the type and number of buyers looking.
In this post, I look at the different listing strategies to help decide which strategy makes sense for you.
There are essentially three main strategies for your list price - pricing below market value, pricing at market value and pricing over market value.
Market Value
Determining market value is something your realtor® can do through a comparative market analysis (CMA). Many realtors®, including myself, offer a free, no-obligation CMA of your house. Essentially the market value is what a reasonable buyer would pay for your home. It's important to know that this may not necessarily coincide with your own expectations, for good or bad.
Sellers often have an emotional connection to their house, and rightly so. The house they are trying to sell has been their home for the last X amount of years and is where they have spent time making amazing memories. It is important to make a distinction here between what the home is worth to a seller and what the house is worth to potential buyers.
Potential buyers who are ready and willing to offer on your house are educated and have seen a number of homes comparable to yours; they, therefore, have a good idea of the market value having done their own CMA through searches and viewings.
Now that we have a market value assessed, let's get back to the strategies:
Pricing Below Market Value
This strategy has different benefits depending on the current condition of the market.
Sellers Market: In a seller's market, supply is low and buyers are competing for the limited supply of houses available. As a result, many sales result in multiple offer situations where buyers are likely to bid higher than the asking price and make favourable offers to win bids over other buyers. It is still important to set your list price sensibly.
Neutral Market: In a neutral market supply and demand are more or less even. This strategy could be effectively used if you have a house that stands out from the other comparables. For example, if your house is in a well sought after neighbourhood or school zone, or if your house is otherwise unique due to renovations, other features or has great income-generating potential. This strategy is a great way to attract multiple offers and get the best value for your house that the market will allow.
Buyer’s Market: In a buyer's market, supply is on the rise and prices are on the decline. In this situation, pricing below market value is a great way of pricing ahead of the market and selling your house quickly. If for example you are still making mortgage payments on your house, and time on the market means more money you are losing in interest payments (holding cost), this could be a great strategy to utilize.
Pricing at Market Value
This is a pretty safe strategy in most market conditions to get a fair price for your home in the current market conditions. In the best-case scenario, you may attract multiple offers, in which case you could sell for above market value. For this strategy to be effective, the property will need to be marketed well to capture the largest amount of buyers.
Educated buyers who have been looking for a while know when they come across a house priced correctly and are more likely to jump in and make an offer.
Pricing Above Market Value
This is something that sometimes appeals to sellers because of the illusion that if the house is priced high, it will sell for high and if not, they can just lower it when necessary. This strategy has a number of downsides and there are examples where an overpriced house has gone for less than market value.
Negotiation: Many buyers avoid houses they believe are overpriced as they do not want to get into lowball offers for fear of offending sellers. Even if your home is perfect for them, if it pops up at the wrong price, you have missed the boat.
Buyer Exposure: If you believe pricing high will limit your downside, it may likely do the opposite. In fact, if you price out of a range, for example, pricing at $305,000 instead of $299,900 may result in the house not being seen by buyers who are looking in the range of $275,000 to $300,000. Restricting exposure limits the number of potential buyers.
The 2-Week Window: Statistics show that your house gets the most attention in the first two weeks after listing. If you price above market value, you are losing out on this critical time when most buyers are interested. The sooner you sell your house, the better the odds that you will get close to asking and potentially get multiple offers. Once your house passes the 2-week mark, the house begins to go stale as new listings pop up. The longer the house stays on the market, the more buyers start to question what is wrong with the property even if the only thing wrong was the pricing. You may even be unintentionally selling other houses in the neighbourhood because you are making those look like better deals.
Price Reductions: If the house has been on the market a long time, the chances of multiple offers are almost non-existent. On the other hand, buyers realize that the house is definitely overpriced and may come in with lowball offers. You may have to lower the price to stay competitive which further adds to the narrative that something is wrong with your house.
Personal Cost: Keeping your house on the market for a long time can be exhausting. Remember the house will need to be kept show-ready at all times to appeal to buyers at showings. Also, if you are looking to move to a different house, you should also consider the holding cost associated with staying in your current house when you could be making payments towards your new house.
As discussed, determining a listing price is extremely important; if you price too high, you could end up on the market for a long time and become stale; on the other hand, if you list too low, the concern is that you may not get what you could have with a better strategy. Therefore, it’s important to discuss the strategy with your realtor®. Furthermore, for any of these strategies to work effectively, your house will need to be marketed well and reach the largest audience of buyers, which is why it is important to discuss marketing strategy with your realtor® as well.
If you are thinking of selling, get in touch and we can set up a no-obligation meeting to discuss the best way forward. I will guide you through the details of these steps and more based on your current needs.
Kyla Miranda Realtor ®
Keller Williams Platinum Realty
709-325-5152