Pricing Strategies for Real Estate
There are two key elements that sell properties: price and marketing. When you are putting your home on the market it is critical to price your home slightly ahead of the market. This will not only get you the most money for your property, but will also make the property sell faster than other similar properties priced behind or at the market. Strategic pricing when you first list your property gets you more exposure and better results.
The one thing many people don’t realize is that pricing will not only effect potential buyer’s interest but will also affects the agent’s interest. If a property is knowingly above fair market value, it is going to be much harder for an agent to sell that property to their client. Agents in the market are very keen on pricing and, prior to going out with buyer clients, they do their homework on the properties they will show them. They have certain obligations to their clients and if a property is grossly overpriced they may pass over it, and will advise the clients of what fair market value is. If a buyer client wants a “deal” or a great opportunity to purchase property for fair market value, an agent could ruin their credibility if they present properties that are over inflated.
When we talk about pricing your property ahead of the market, it does not mean you put your home below fair market value. It is simply conducting the proper research on comparable sold, pending and active listings. It takes a close examination of the current real estate market’s pricing, days on market, days until sold and average price for comparables and formulating a pricing strategy that gives your property a competitive advantage. A clear example of this would be listing a property at $299,500 when other similar properties are $300,900. The difference here is $1,400 but the perception is significant to potential buyers. If someone is searching for a home with a search criteria of $199,000 – $299,000, the home will show up in the search and the property is below the price resistance that the buyer has.
Another key strategy for pricing is taking regular price reductions in alignment with market trends. This will continue to keep the property fresh as a listing and will provide additional exposure. On the local MLS price reductions are highlighted with a green arrow in the listing and show up under one of the many predetermined search criteria. When a client asks me for that “deal” I am going to do a MLS search for the recent price reductions, because these are properties that are adjusting to the market pricing trends. You should discuss your pricing strategy for price reductions with your agent.
There are a few things to remember when you are talking about pricing strategies of your home. First, pricing the property to sell slightly ahead of the market is both an art and a science. This is not an experiment to see if you get any offers or what you can get for your home. A new listing that is priced wrong will stay listed much longer than a property that is strategically priced. It does not matter how much the property is marketed, staged, or promoted if the home is not priced right for the market to begin with. Many sellers find themselves with enormous amounts of carrying cost because the home is priced to high when it is listed and they are never able to catch back up with price reductions.
Secondly, as a seller check out the competition. It is one thing to know that your home is priced right if you are comparing apples and apples, but I have seen properties that are priced equally but one of them is in better condition, has new appliances, is newly renovated or has a better view. If all things are equal, then pricing at the same price might be the right strategy. However this is seldom the case. What sets your property apart from the competition? How does your property “show” compared to the competition? I am always amazed that people don’t always check out the other homes on the market prior to listing theirs.
Finally, it is critical to review the pricing strategy every thirty days. Market conditions change daily. New homes come on the market, homes sell, go pending or listing agreements are terminated. All of these activities will have an effect on the sale of your home.
I have seen homes sit on the market for a year without a single offer and most often than not it is due to the home being priced way out of the market. In today’s market pricing is more important than ever and should not be underestimated. Think about what your needs are and do your homework.