What are the top reasons to price your home accurately?
In study after study, it is proven that one of the biggest reasons for a home not selling is that it is overpriced. An overpriced home typically sells for less and takes longer to sell, so who wouldn’t want to price their home accurately?
It is important to price your home accurately from the start, and the best way to do this is by getting a pre-listing appraisal. A pre-listing appraisal will compare your home to other recently sold homes as well as current active listings.
After all, won’t buyers be looking at other homes for sale in your area? So why wouldn’t you want to consider active listings in your pre-listing appraisal?
Since pricing your home too high is one of the biggest reasons for a home not selling let’s take a look at what can happen when you do this.
1) An accurate price will help it sell quickly- During an appraisal assignment, one of the statistics we look at is the days on market (DOM). This stat is a measure of the number of days it takes to sell a home from listing to contract.
If the home price is set too low it will sell quickly but you will likely leave money on the table. Setting your price too low usually does not happen very often unless you are super motivated because you are in a hurry to sell. This can happen during a situation like a divorce case or maybe if you’ve bought a second house and don’t want two house payments.
The price should be set at a level that will sell the home within the DOM range of other homes in the area. This will maximize the amount of money you get and minimize the time on the market.
2) An accurate price will not turn people away- Buyers in today’s market are very savvy. With the amount of data available online, buyers are very knowledgeable. Information on other available homes, their prices, and interior photos are available for buyers to compare against each other.
If your home is priced too high buyers will know it immediately by comparing your home to the others. Your home needs to be priced so that it competes well with other homes that are similar in location, age, style, features, and condition.
3) An accurate price will help it sell higher- Studies show that if a home is priced too high at the beginning it can end up selling for a lower price than if it was priced correctly to begin with. When a home is overpriced it can take longer to sell because buyers will see this and pass it up.
After the home is on the market for a while without selling, most agents and sellers will lower the price. This can look as if the seller is desperate and most buyers will pick up on this and make offers that are below market value. Many sellers will be so ready to sell because they want to move on with their lives that they take the lower offer.
4) An accurate price will help it compete better- Remember what I wrote earlier about an accurate price not turning people away? When priced to the market your home will complete better because buyers will see that it in the same price range as others that are in the same area, similar size, age, style, features, and condition.
Most buyers know exactly what price range they can afford. Whenever they do home searches within this price range your home will look much more attractive to them if it is similar to the others, and this will make it more competitive.
5) An accurate price will not sabotage financing- The appraisal is usually one of the last things to be done in the home buying transaction. I have seen situations where everything was going well until the appraisal was completed and it came up short because the sales did not support the contract price.
The list/contract price has to be based on more than what the seller wants to get out of their house. It has to be based on what the market shows other similar homes are selling for. If it is priced accurately from the start, based on market data, then the likelihood of the deal falling through because the contract price was too high is diminished.
The old strategy of pricing your home high and then lowering the price if it doesn’t sell is not smart in today’s market. You have to price your home accurately from the start or smart buyers will pass on your home and move on to other sellers who have done their homework. Which type of seller do you want to be?
Question
Do you have anything else to add? I’d like to hear your opinion so leave a comment below and as always, thanks for reading.
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John Wake is right, agents tend to overprice. Hiring an appraiser can help the agent do the job of selling without being the bad guy who tells the owner their house is worth less than they had though.
Great point Gary, thanks for sharing.
Sellers usually think that real estate agents will lowball them on price so the agent can sell their house fast with little work.
The reality of usually the exact opposite.
Many real estate agents tend to highball the value because agents know that sellers have a VERY strong tendency to hire the agent that gives the seller the highest estimated selling price.
Every agent knows this so some agents play games with the price they tell home sellers.
The typical agent overprices, gets the listings and then hammers the seller to lower the price from then on, until the house sells.
Sellers do find the highest price at which the home will sell but they miss the opportunity to sell at a premium price. The longer the home is on the market, the less negotiating leverage the seller has.
If a home is going to sell at a premium price – the high end of the fair market value range – it will go under contract in the first couple of weeks on the market, when the seller has the most negotiating leverage.
So to avoid real estate agent pricing games and increase your odds of selling for a premium price, I think it’s a GREAT idea to get a good pre-listing appraisal.
Great points John. I do hear the same complaint that homeowners make about agents selling for a lower price too but you make a very good point about the exact opposite. Listing at an unreasonably high price only hurts the agent in the long run because people talk, and if sellers don’t like how you handled the sale of their home they’ll let others know. You make great points about negotiating power and pricing, thanks for sharing your thoughts.
Good stuff Tom. I completely agree about accurate pricing. The stats in my area even back it up too. For instance, properties that sold within 30 days last month in Sacramento County had an average sales price to list price ratio at 100.57%, but properties that sold between 31-60 days were at 97.86%, while properties taking longer than 120 days were at 97.19%. Of course if properties are being priced too low and therefore selling quickly that can skew stats, but when we are looking at a very large amount of data like I just shared (an entire county), it’s really compelling to see the trend. There is something about being priced at a reasonable level and selling within an amount of time that is reasonable for whatever the market is at the time too. For reference, on average properties took 32 days to sell last month, so we are in a market where things are moving more quickly. 10 years ago properties were easily taking 90+ days on average to sell.
Glad to hear you confirm my thoughts on this Ryan. Having a good grasp of the local data, like you do, is important both for appraisers and agents because it helps us come up with a list price that will compete well, sell in a reasonable amount of time and at the highest price possible. Thanks for sharing the stats about your area, Ryan, I can tell you are in a hot market now.