Pricing your home right in the current real estate market.

February 13, 2009

Now more than ever pricing your home RIGHT is of utmost importance. With values falling up to 20% in some areas in the past 18 months, pricing your home competitively is the only way you will have a chance to stay a head of your competition; competition being other houses in the area comparable to yours. List too high and your home will sit on the market and may never sell or even worse sell for much less than you want it too.

Let’s discuss one of the 1st things a prospective seller says in defense of pricing a home higher than their Realtor recommends.
“But we can always drop our price.”
No you can’t. Well you “can” but most likely it will be too late. New listings get the most activity the first 3 weeks of the on the market, after that the interest in the house levels off. It no longer is considered a new listing on the “hot sheet” and just finds its way with the rest of the over priced listings in your town.

If you do not put your best foot forward (aggressive price) from the beginning then by the time you drop the price it will be too late, you will be “chasing the market. If your Realtor says you need to be $50,000 less and you disagree but finally after 1-3 months “give in” to his price recommendation it is actually too late. Now to be competitive with the other listings in the area you may need to be $75,000-$100,000 less than your current asking price.

Here is a good example. I had a seller call me after 6 months on the market with an agent and the agent was not able to sell the house. The asking price was $700,000. I came in and told the owners you can’t be a penny over $650,000. Of course they did not agree and thought I was crazy and refused to list it “that low”, and the lowest they would allow me to list it at was $675,000. After a few weeks on the market the activity was minimal due to it being overpriced. I asked them every week to please let me drop the price.
After 3 months my sellers “gave in” and let me drop the price but I told them $650,000 is now too high. Of course I am the “crazy” one and they only let me drop it to $650,000. I told them it is too high and to drop to maybe $619,000 and hope to get $600,000. Well at $650,000 I brought them 3 offers at $600,000 and neither buyer was willing to go higher. My sellers told me there was no way they would “sell their house for that low”. I finally let the listing expire because my sellers were unrealistic and were more or less ensuring themselves to lose a lot of money.
They listed with another agent and 6 months later they sold… for… $550,000.
“Buyers are always going to bid lower”
Yes and No. A competent buyers agent knows the market and when a house comes on the market at a very good price the agent educates their buyer on current listed and sold properties and more so than not the offers come in VERY close to asking price. I saw a house that was GROSSLY over priced, about $150,000 over priced then one day the agent drops it $150,000 to $425,000. My buyer saw it and was impressed and felt it was worth every penny of the asking price. The agent just dropped the price the day we saw it (I told her about it as soon as I saw the new price), my buyer was unsure about what to offer and we discussed the comparable homes in the area and we offered asking price. Of course it was accepted and my buyers were more than happy.
Another reason why thinking you can “always lower the price” or “buyers are always going to bid lower” is wrong is that you push yourself out of the market with an over priced listing. SERIOUS buyers these days know that prices are down, they know sellers have dropped prices a lot, buyers are NOT searching for houses that are $50,000-$75,000 higher than a number they can afford like they used to do years ago. Buyers looking for a $400,000 house are not searching much higher, maybe $425,000 and under and MAYBE (rare) as high as $450,000 but chances are they are not. So when you price your $400,000 house at say $440,000 you just made your home INVISIBLE to buyers because they do not know it exists when they search online for homes. Price it at say $415,000 and you expose your home to a large pool of buyers and your chances of getting a good bid on your home has drastically increased.
I had a seller who did not let me list his home at the price I told him, the price was $850,000 (down from $969,000 from his previous agent who was not able to sell it) and I said we need to be around $800,000-$810,000 and he only let me drop the price to $839,000. After 3 weeks my seller was fed up and I was even more fed up and pleaded with him to let me drop the price before it is too late. I asked him what is his bottom line and he said $800,000 give or take a few thousand.  Well we priced it at $800,000 even after my seller said “but people are going to bid lower”, of course the uneducated buyer will but not the educated buyer.
Within 24 hours we had THREE OFFERS. One for $700,000, one for $750,000 and one for $790,000 and we settled at $798,000!! The buyer who bid the $790,000 knew the market and knew the price was good and she also said this “I never knew this house was even on the market until the price was at $800,000 and I would have never seen it if you did not drop the price”.
Another example happened when I went on a listing appointment and the price I have the seller was $550,000. I stressed not a dollar higher is this unstable market. I did not get the listing and 2 weeks later I see his house listed at $750,000!!! To make this story very short, he is now on his THIRD real estate agent and his current price is $450,000.
Agents do NOT waste their time showing overpriced houses.
When an agent sees a listing that is obviously overpriced they are not going to waste their time showing it especially when their buyer tells them it is just way too out of their price range. An agent is not going to show a listing like that and then lose creditably with their buyers and waste their buyers time driving around showing homes that are not what they are looking for.
The old vs the new real estate market.
When the market was “hot” from around 2002-2005 agents would look at what sold and then list homes around 5-10% more than the recent comparable sales.Now we look at what just sold and price it LESS than or at the price the most recent comparable’s sold for. Any other way and a seller will chase the market and lose money like the seller above who listed at $750,000 and is now at $450,000.
The moral of the story is listen to your Realtor’s price recommendation and price your home inline with the competition or even lower and NEVER ever choose your agent just based on the PRICE they tell you. If that was the case then I would just go around telling sellers what they WANT to hear and not what they NEED to hear and give them all over priced values. Some agents love to throw out a very high number in order to “steal” the listing and get the listing over the other agents who interviewed with the seller. Avoid this unethical agents.
My job as a Realtor in regards to seller clients is not to just sell your home but to sell your home for TOP DOLLAR and in the SHORTEST amount of time. More importantly to make sure you do not get less than you should and an over priced listing is a perfect recipe for loss.  If a competent Realtor comes up with a value on your home and you want to list higher than they say because “people are always going to bid lower”, you probably just killed your chances of not only getting a bid near the value the Realtor came up with but any chance of selling your home at all.
Thinking about selling YOUR home? Fill out my Free Home Evaluation form or call me at 914-403-4868.
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