The first goal of pricing your home for sale is to compel buyers to want to see it in person. Of course, the ultimate goal is to sell your home at a good price. But, you won’t sell your home at all if buyers don’t make appointments. Sure, you hear stories of buyers making offers on homes “sight-unseen”. But that is a very rare occurrence. And sellers who go under contract, or into escrow, with a buyer who had not seen the home at the time they made the offer, always run the risk of the buyer backing out of the deal when they finally do see it. And it happens.
For buyers to make good, quality offers, their attention needs to be diverted from other homes and drawn over to yours. Compelling them to make a showing appointment to walk through your home instead of another is obviously done with good staging and great online photographs. But the most important factor of all is to put it on the market at a compelling asking or list price.
A compelling asking price is simply one that makes your home look like a better value than the “comps” —all the other similar homes currently on the market.
Agents have many different words for this including right pricing, energy pricing, aggressive pricing, bidding war pricing, reserve pricing (think auction), and compelling pricing. So, what is that? It does not mean that you price it at an absurdly low number in a transparent attempt to trigger a bidding war. Some listing agents do get sellers to do that. Sometimes it works but sometimes it does not and it’s a dangerous game to play. More on that below.
Here’s the key: Choosing a list price that makes your home look like a great value—without underpricing it—is like threading a needle for your real estate agent and requires experience, skill, and great expertise in the marketplace. You want to price it low enough to draw attention away from other homes and to yours —but not so low that you will be disappointed if you only get one offer —at list price.
Perhaps this means listing your home at $795K when similar comps are all listed at $805K. Yes, I know, $10K is a lot of money to possibly forfeit right out of the gate. But are you really forfeiting it? If your neighbor’s home is listed at $805K and gets only one offer at the asking price —after several weeks on the market (or maybe none at all!), and your home got multiple offers coming in right away, all above the asking price, and possibly selling at $815K; who was the smarter seller? You not only sold it quickly, but you got $10K more than your neighbor. And, if the comps are all worth about $805K, then you got a premium price; outperforming the market by $10K.
Don’t make the mistake of thinking that offers above the asking price (or even bidding wars) only happen in a strong seller’s market. It’s not true. Buyers do not stop shopping, en masse, when the market is down. People always need homes. They’re now just looking for the value play. A house or condo is a commodity, just like pork bellies or gold. They sell every day, without exception, in any type of market. The only thing that changes is the value, or the price. It might seem that buyers have taken a pause because sales have slowed in the entire area, but they have not. What’s really happening is that the Realtors and sellers have not yet re-adjusted the asking prices across the board in accordance with the the changing market.
So while the market might be down —and all those $800K homes are now only worth $775K, you could still end up with a sale price of $790K or $795K, simply by putting your home out at the right asking price. You’re still outperforming the current market conditions because you priced it right.
There are agents out there who think there is no such thing as pricing too low. They believe that “the market will speak” and a low, low asking price will bring so many offers that the property will still sell at the same premium. I could not disagree more. I’m not saying that it never works. It has. I’m saying that it is risky. Compelling prices are already a little lower than the rest of the market. An absurdly low list price is risky because you are saying that you will accept that number if even one buyer makes a full price offer. I have seen many homes that were priced ridiculously low – and for any number of weird, unlucky reasons – failed to get any offers at all. Then the seller is in a real pickle. Should they raise the price and look crazy? Withdraw it from the market? Or sell it at that low asking price? None of these are good options.
For more insight on the West Palm Beach market, visit my blog.