The 12 simple truths about pricing your home to sell
Pricing, together with marketing are the two most significant factors the will determine if your house will sell within reasonable time or if it will stay on the market indefinitely. Unfortunately many sellers are very sensitive about this subject and often have unrealistically high expectations about the value of their house. Because of that, many realtors hesitate to give an honest price opinion and challenge that unrealistic assessment in fear that they will lose the listing.
Only great professionals are going to tell you these 12 truths about pricing your house to sell.
1. If there are fewer than a normal number of showings and no offers, the property is over-priced. If there are a lot of showings and no offers, it means the same thing (assuming there are good pictures online and no showing obstacles).
2. The lower the listing price, the more showings and offers there will be.
3. A property will sell for full list price if it is worth full list price.
4. You don’t need “negotiating room” if you are priced right.
5. No matter what the list price is, agents will almost always offer something less, initially. *This DOES NOT mean the buyer won’t pay full, or close to full list price.*
6. A property priced above what it’s worth will still only sell for what it’s worth, but it will take longer.
7. Buyer incentives, such as offering to pay buyers closing costs, carpet allowance, repair allowances, etc., will not increase showings as much as a price reduction for the same amount. *Reason: The buyer normally doesn’t see the incentives until after he selects the property for a showing. The initial selection was based on the list price.*
8. You are more likely to get the full list price in the first 2 weeks of a listing, than the same price, after it is reduced to that price, after 1-2 months. *Reason: When it’s a new listing, buyers feel more pressure to offer full price due to fear that another buyer will snatch it up first.*
9. Even if a buyer agrees to pay the full list price of an overpriced property, the sale won’t go through after the buyer gets the appraisal. There is a provision in the standard contract form that allows a buyer to cancel if the appraisal is lower than the contract price. In such cases, the seller normally reduces his price to the appraisal amount.
10. When a listing is 3-4 months old and hasn’t had a price reduction, it usually means (to agents) that the seller is not serious, or there is something wrong with the house. Many agents consider such listings a waste of time and won’t bother showing them.
11. It makes no sense to consider an offer more than 5% less than your listing price. You are smarter to reduce your price by 3-5% because you may get a full price offer at the new price. If the price you really want and expect to get is 10% less than your list price, you are making a pricing mistake. You should reduce your price to no more than 5% of what you want, or preferably just ask for what you really want.
12. It makes no sense to offer a bonus or a commission above 3% for the buyer’s agent. The buyer decides which house he is going to buy, not the agent. And most of the time the buyer is selecting which houses he will go see in the first place. The commission amount does not enter into the decision. However, offering less than a 3% commission may cause the agent to be very reluctant about showing the house.
Pricing and Marketing
One thing must be said if we want to be honest about marketing. Even the best marketing will not increase the selling price of your house by much. What great marketing does is that it eliminates missed opportunities. Do not assume that in any market home buyers will go out and see all the houses that fit their criteria. Disposable time is scarce and the buyers feel satiated by so many quality photographs of a listing online so much that they won’t tour all the available properties (in marketing we call this "Satisficing". Look it up).
Great marketing will put your listing at the top of the short list of homes the buyers want to see first and will make sure that the ideal buyer, the one that will offer the highest price for your house will come, see your house and make an offer to you instead of the competition.