Pricing is a very close second or equal to the property location factor when selling property. We have all heard the adage - location, location, location when referring to real estate selling and purchasing! And it is certainly true that it is one of the top considerations when buying a property. But after my 24 years of dealing with sellers and buyers, analyzing numerous trends and statistics and moving through various ups and downs in the market, I know firsthand that pricing is certainly one of the top considerations as well, if not the top one, no matter how well you home shows or its location, to attaining a successful sale in any market condition.
It's important to understand how many sellers price their homes. Here are 4 common strategies you should be aware of when listing your home as buyers will conclude that one of these was the basis of your pricing based on their agent’s feedback or market comparison to other properties similar to yours they view. The more proper you are priced from the beginning, the better market response you will get. This applies to acreages, luxury properties, city properties & condos alike.
1. Clearly Overpriced:
Every seller understandably wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for a listing, an easy way to win the battle is to over-inflate the value of a seller's home or ask them what do you want to list for. This is done far too often, with many homes priced 10-20% over their true market value.
This is not in the seller's best interest, however, because the market won't be fooled. As a result, their home will languish on the market for months and for some large properties even for years until they realize and accept their error. This can often be an opportunity for buyers, however, since the longer these properties are for sale, the more likely it is that they can nudge the disgruntled seller into reality and get him or her to accept an offer not in line with original expectations.
Unfortunately an agent sometimes gets dropped that has worked on and spent money on a listing for a long time and the seller switches agents blaming the current agent for no results. However when listing with that new agent the seller agrees to reduce price to a more proper range for a fresh start and soon it sells at that more market friendly reduced price!
2. Somewhat Overpriced:
Another segment of properties will be about 5-10% overpriced. These homes will also sit on the market longer than the seller wants. There is usually one or two factors at play with these sellers:
They either believe in their hearts that their homes are really worth this much (after all there's a lot of emotion caught up in this issue), OR they've left room for negotiating which is often a strategy. Either way, time has a way of correcting both seller errors.
3. Priced Correctly at Market Value:
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market and at the recommendation of an experienced, informed agent. These competitively priced homes usually sell within weeks or a few months at, or very close to, the asking price.
4. Priced Below the Fair Market Value:
Some sellers once in a while are motivated by a quick sale because of a necessity to move out of town or are risk-takers and willing to try to get competing offers by offering a lower list price to the market. Others list with a misguided agent who recommended too low a price. These homes can attract multiple offers and sell fast - usually within a few weeks or quicker - at, or above
the asking price. Certainly a strategy to consider but they don’t always work as planned.
There was a graph prepared in 2016 by the Real Estate industry after tracking thousands of listings comparing Property asking price and the affect on percentage of buyers accordingly that is worth looking at and and is quite enlightening. The results are shown in the graph below.
So here are some suggestions to keep in mind when listing and pricing your property that will affect your selling time and end result.
- Don’t be influenced by family, friends or colleagues but trust an agent who knows the business & the market, sales patterns, analyzes sales data and is working in the best interests of his or her client. And if no sale is forthcoming, take a hard look at possible reasons including price. People tend to want to save face, tend to be a little greedy at times and don’t want to hear the absolute truth as they are always hoping for more and the ‘right buyer’ to appear. But objectivity is so important in the selling process.
- Pay attention to market conditions and competition and try to be accepting about both the pros and cons of your property. Recognize them and accept it if you place has a major challenge of some sort that has been highlighted from agents or showing feedback and adjust accordingly.
- Avoid the trap of thinking someone can “always bring an offer” mindset. Truth is they will likely not bring an offer if they don’t even come to see your place or if they or their agent feel it is overpriced and avoid considering it.
- Sharp pricing and maybe pricing just slightly below market can create a buzz and get a faster and better result and allow you to move on to the next chapter of your life.
- Face realty of current market conditions and don’t treat the process as if you will get lucky and the right buyer will arrive despite asking higher than recommended dollars and accept the fact our market is still tending to be a buyer’s market and they can take their time and have choices. We will likely not be returning to pre 2007 conditions in Alberta anytime soon.
- And certainly if you have found another place you want to buy and you have an offer on it subject to the sale of your place why would you even consider pricing too high. You risk losing the place you have an offer on by being bumped by someone else if yours is not getting action!!
Why go through unnecessary sleepless nights, frustrating long stretches of keeping your home in ‘show condition’ but no showings happening and justifying to family, friends and yourself why you are not selling. Price correctly and improve the chances of success. In a few years you will forget what you adjusted in price to sell and will only remember that you had a successful sale and are in your new environment and moved on.
And yes there are always a few exceptions which make people still go too high such as hearing about a friend, colleague, family member or broker advertisement bragging that their agent sold their place quickly in competing offers and over list price and above market. Well those cases are rare and were likely the result of a very well presented property in a location which had scarcity of product and was a very high demand area.
It is also worth reminding us all that one has to guard against ‘need based’ selling. i.e. I need this amount or want this amount out of my sale. It is nice if you can achieve it but the reality is the market dictates what you will sell for. So if you are not getting action or an offer on your place after sufficient time on the market it likely points to one of 3 things: (a) there are not enough buyers for your product, (b) there is a design flaw in your property holding it up or (c) the price is still not attractive enough to secure a buyer. The one thing you can control is pricing. So maybe a significant reduction is still needed to sell?
I know in some cases I do not get asked back to list a property that I evaluated because of pricing that I suggested, but I have tracked over 90% of the listings I was not chosen for over the years and in the end the sellers sold at or very close to the price I originally suggested. This has not made me happy, of course, to lose business but the research has given me confidence to always try to be as honest and correct as possible for my clients. In some instances sellers have convinced me to start at a somewhat higher number but once one starts it is very hard to come down in pricing until a continued lack of interest or minimal showings forces the decision. I know this to be true for many other agents.
So if you are planning to sell in 2018 I wish you well, but would urge you to pay heed to much of what is in this article because history has shown these principles to be true in most cases.