Selling Your Sarasota or Lakewood Ranch Home? Make Sure the Price Is Right!
In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them. If you avoid these simple mistakes and you have the right marketing plan in place, you will get top dollar for your home in no time!
Pricing to homes still on the market
One of the biggest mistakes most sellers make is pricing there home based on what's for sale, not what's sold. We use a pricing strategy called the 5-5-5 this will create a perfect pricing bracket for you. The first 5 homes are currently active (these are the unlucky homes that have not had an offer) these 5 listings will be your high price point. The second 5 will be pending and under contract listings. (This is the price point that caused buyers to take notice and make an offer) this is usually your best starting point. The last 5 will be sold homes ( this will allow you to see the difference between listing price and sold price).
Check out sold listings in your neighborhood here
There is no “later.”
Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.
John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered their price. His article, Listing Price, Time on Market and Ultimate Selling Price, published in Real Estate Economics revealed:
“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”
Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.
Overvaluing Repairs and Upgrades
So you did $100,000 in upgrades after you bought your home, and then you got to enjoy them for 5 years. This will not increase the value of your home by $100,000. Remember you placed these upgrades in your home so that you could enjoy them while you lived there. Buyers look for value in a home, so they will compare the price of your home against the other homes they like. Home values will go up, the stuff inside them will not.
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Don’t build “negotiation room” into the price.
Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.
Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!
One great way to see this is with the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.
A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house.
Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?
Listen to what the market is saying
- What feedback are you getting from agents?
- What are buyers saying?
- What kind of traffic is your listing getting online?
- Is that traffic turning into showings?
- Offers?
- Have other homes around you sold?
- What for?
- Did the buyers that saw your home buy something else?
The Price is Right
Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Let's get together to discuss what is happening in the housing market and how it applies to your home.
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