How to Price Your House to Sell???
What You Need To Know To Correctly Price Your House For Sale?
When you go grocery shopping and buy milk, or bread, or rice, you pay the price on the tag. If it says 6 dollars and 27 cents, this is exactly what you pay, 6 dollars and 27 cents, no more, no less. In any retail setting you pay the price on the tag, whether it's food, clothing, or anything else. Even if you are buying the last bottle of milk in the store, and behind you in line there are five more people who want this same bottle of milk, the store still charges you the price on the tag, even if other customers might be willing to pay more. Real estate is different. The vast majority of houses are usually sold above or below the asking price.
So what is the best way to come up with the right “asking price”? Should you price your property low and expect a lot of attention and multiple offers? Or price it high to leave some room for negotiations? Or maybe set the very price you are willing to accept? The correct answer is “it depends”. Let’s review considerations for pricing a house.
Number One – Nothing is Certain with the Real Estate Market - sometimes it Slows Down.
The economy goes up and down. GDP data, unemployment figures, stock market fluctuations, the geopolitical situation – all of this and much more influence buyers’ confidence, affordability of houses and impacts the dynamics of your local real estate market. A colleague recently said that when someone sneezes in Washington DC, our market here reacts. I certainly agree with that.
We also can’t forget hyper-local factors impacting the market: Imagine, suddenly, three more homes on your block came on the market the same week you put your own house for sale, it’s just like at the Farmers Market, one day for some strange reason you get tons of tomatoes. Then, there is a chance that your house, just like those tomatoes, may sell for a lower price than expected. The good news is that the shelf life of a house is way better than that of tomatoes. Unlike the tomatoes that the farmer has to sell on the same day, the house can stay on the market for some time to find the right buyer.
Number Two – Active Market - Lots of Active Buyers and Not Enough Houses
Yes, this is all about supply and demand. Lots of motivated buyers and very few available houses can create a buying frenzy. Here, in Silicon Valley, we periodically see this phenomenon.
We’ve witnessed times when most of the submitted purchase offers on the market are non-contingent. Basically, buyers either completely forgo their right to investigate the house before finalizing the purchase, or they complete the whole investigation before submitting the offer.
In this kind of market, putting a low price could be very beneficial for your sale, especially if you are selling a desirable property in a good location. Multiple buyers will be overbidding each other in order to get the house. You will handsomely benefit from this dynamic, and the “winning bid” may get you an unexpectedly high selling price.
Number Tree – Micro market Fluctuations and How They Influence Sales Price
During one of our past sales, we had an interesting experience. The house went on the market at the end of July, when after a wild spring and early summer real estate season, we experienced a sudden slowdown. We had very few visitors at the open house and kind of prepared for a long sale. Suddenly we got approached by a buyers’ agent who begged us to allow her to submit an offer right away. Her clients lost four or five bidding wars earlier that year and she was desperate. She never asked about any details, just asked for a preemptive offer. We asked the seller and of course she agreed, it was, after all, the only interested buyer. The offer we received was very surprising – it was substantially higher than the asking price, certainly higher than the seller expected. The buyers got the house and were very happy with the purchase. But this experience taught us a very important lesson: sudden local market fluctuations cannot be ignored. Being out of synch with the local market may cost buyers and sellers hundreds of thousands of dollars.
To correctly read market behavior and tie it to your pricing strategy, talk to a good real estate agent. Her knowledge of the local market and advice would be invaluable.
Number Four – WHEN to put a price tag on the house
If you are just starting the process of selling your house and are considering some improvements, like, say, painting, new floors, bathroom and kitchen upgrades, etc, it easily may take 6 to 8 weeks. When you’re just starting the preparation work, it is quite impossible to put the right price on the house. Your house will be different, so it is not the one you will be selling and within this time period the market may change. So we suggest pricing the house at the very last moment, a day or two before it goes on MLS, when your house is fully prepared and ready to go.
At that time, you can find out how many offers similar (competing) homes in your area got last week. If you find out that they let’s say, had 10 offers, then 9 people who didn’t get the house, will come to see your house and the odds for you to get multiple offers are very high. Put a reasonably low price on it and enjoy the ride. If in the last week or two competing homes don’t get buyers’ attention, then you understand that the market is slow at the moment, and you may choose a different pricing strategy.
Number Five – Pricing as a Marketing Strategy
Once, in the past, we had a listing in Los Altos Hills. It was not an easy sale. Before we came in, the house was on and off the market for five years with six different realtors. The average Days on Market back then was 90 days.
We had two pretty active open houses, but no takers. We didn’t want the house become a “stale” listing, so after six weeks with no sale we increased the price by 10% and announced a “New Price” on the house. Boy, did this make an effect! Everyone who came to the house before appeared at the open house in dismay: What’s happened? Why is the price higher now?
In two weeks, we lowered the price by 15% and this time we announced huge “Price Reduction”.
The main reason for adjusting the price during long listings was to place your listing on the top of the search list. We learned about this technique from builders who sell brand new construction. Their prices constantly went up and down.
This example of a deliberate price change worked as a marketing strategy, to attract buyers’ attention to the house. In the end, we sold this house at a great price and the sellers were very happy.
I hope you learned something useful from this video. If you have any questions or plans you want to discuss, please call or text us – we are always glad to help you navigate a complicated real estate terrain.