The Pricing game

Chess It has never been easy to price a home.  These days it is more difficult than ever before.  Buyers see everything on the market as being over priced and no one offers full price any more.

If  a home is priced at or slightly under market value it will attract buyers and have showings but offers on it will be for less than the asking price by at least 10K on the average priced home.   It isn’t a good strategy to price the home at 10K over market value to help sellers get their bottom line.  Homes that are over priced by any amount do not get many if any showings at all.  Without any showings there are no offers and the home sits on the market month after month.

market times are longer than they used to be but homes are being sold every day.  The homes that sell are those that are properly priced.

It  works the best to set a price that is slightly below market value.  It will get showings and offers but on average those initial offers will be for about 90% of the asking price.  The good news is that once an offer comes in it can be negotiated up.   Buyers seldom make their very best offer on the first round and they will negotiate.    I like to think of low ball offers as opportunities.

The true value of a house is what a buyer will pay for it and it is buyers, or the market as we say that dictates the value of real estate, not the seller.   Sellers have to be ready to play the pricing game and Realtors have to be willing to go that extra mile to recommend a price that is low enough so that buyers will see the home, but high enough so that when an offer does come in it is possible to negotiate it up to an acceptable amount. 

Sellers need to understand that no matter what price they set buyers will offer less unless the price is so low that the home gets multiple offers and buyers raise the price by outbidding each other.

When I represent buyers I play the pricing game a bit differently.  There are only a few circumstances where I will recommend making a full priced offer.   

5 Replies to “The Pricing game”

  1. I think this article is true for all of us selling real estate today. Pricing homes has never been as challenging as it is right now. Some sellers think you’re underpricing their home if its below market, but that’s really the only way to get the home sold. Over pricing means you’re always playing catch-up with the market and price. Very interesting. Thank you.
    Sue Brown
    Prescott Real Estate Round Up

  2. As a buyer without a house to sell first, it is encouraging to hear that prices and offers on average are low. What are your strategies/recomendations for us buyers? Especially considering sellers who don’t want to play the pricing game? Great, informative posts, thank you.
    MP

  3. As someone who just sold my home about six months ago, I was really thankful that my home was put on the market at just slightly under market value. We had immediate interest, and sold the home very, very quickly. Would we have eventually gotten a higher purchase price if we’d priced the home higher? Maybe, but for us, it was soooo worth it to sell quickly — it alleviated enormous stress and anxiety about the process.

  4. MP – I think buyers have an advantage. Make sure your agent does a market analysis on the home in question. Some sellers will not come down in price and others will. I guess i don’t have “blanket” advice other than be prepared to negotiate, you won’t get anything unless you ask for it and it doesn’t hurt ot ask.

    Saskia – Chances are if you had listed your home for more than you did you would have ended up with less that you got. As it sat on the market buyers would come in with lower offers. When they sell fast sellers always wonder if they got as much as they could have. There isn’t any way of knowing but there are ways you could have ended up with less. over pricing a home is one of those ways.

  5. There’s been a lot of logs addressing this issue. Obviously, your price strategy will differ depending on the current state of the market. When houses were flying off the market you could have taken 3 comps and added 10%. Things are different now, creating a competitive market for your home is essential.

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