Thinking about selling your home? Obviously, one of the main things to do is how to price your home effectively. There are numerous strategies you can pursue, and each has pros and cons. But, come up with a plan with your real estate agent so you can adjust when things stall, or even sky-rocket. Let’s explore some methods you can apply to pricing your property for sale.
Option No. 1: Price High and Shoot for the Stars
One way of pricing a property for sale is to collect the most recent comps and then add a premium. This also assumes you won’t be competing with similar properties that are currently being marketed at a lower price. The idea behind this pricing strategy is to focus on the scarcity of the property type, which is a combination of the location, size, and space. Ideally, you are able to set a new record and find a buyer who just missed the boat on prior properties like yours. You may also encounter a buyer for whom your property is the right fit at the right time.
The main benefit of this strategy is that you have a massive opportunity to reap the upside on getting as much as you can for your property, which is the goal of most sellers. The main negative is that your property may simply sit there without getting much interest. How much interest you draw will also be based on how much of a premium you add. But, you never want to be that property — the one where people and other agents say, “They’ll never get that price.”
Option No. 2: Price High and Be Willing to Drop
What happens when you price high and aren’t getting any bites? Have a predefined price drop strategy with your agent. Yes – it’s OK to shoot for the stars, but also be realistic that you might have to settle for a lower price. You and your agent can discuss the amount of traffic — literally and online — that your property is getting. This will help gauge whether it’s just a matter of finding the right buyer or whether a price drop is truly necessary. Price drops help attract new potential buyers and may also make other interested buyers “boomerang” and come back for a better look.
Option No. 3: Price High and Just Sit
If you price it too high and don’t receive much interest, the worst thing that could happen is the property sits. You may not be in a rush, and you’re willing to wait until you get “your price.” But, letting the property sit won’t do you much good in the long run. That’s because when a listing sits, it becomes “stale” in the eyes of a buyer. And the longer it stays on the market, the less interesting it will be and the more questions raised as to “why it’s sitting.” However, this is a strategy some property owners may choose, simply because they can.
Option No. 4: Price According to Comps and Other Listings
Another strategy is to price in line with prior sales of comparable listings and to also market it in line with other listings currently on the market. Your property will sit alongside the other inventory, and pricing will not be a differentiator in your marketing strategy. Pricing “fairly” should ensure that your property doesn’t sit on the market for too long and that would-be buyers will come by for open houses and private showings.
The advantage of this strategy is that your property won’t be an outcast. However, with this option, you can never go up in price; you can only go down. The caveat here is in new development sales, where pricing often will increase as the sales cycle moves along.
If the market is competitive, and the price is just right, your agent may still encourage you to do very slight price drops. This ensures that your listing will appear at the top of searches since it will be recently updated. Also, simply dropping below certain price thresholds may solicit the interest of an entirely new set of buyers.
Option No. 5: Price Low to Create a Bidding War
When you price low, an abundance of interest is bound to be created. If the number of “saves” for a listing is high after only a few days on the market and if the first open house has a line out the door, it suggests multiple bids will likely come in. Bidding wars are all about human psychology. Seeing a lower than usual price is a temptation that is hard to pass up. But, when multiple people see the low price, that’s when the action kicks in.
The downside to a bidding war is that when it is all over, you could have a buyer that realizes they got way too emotional about winning it, and they could back out of the deal. You only have once to capitalize on a bidding war, and you never want to have to go back to other bidders to let them know the deal fell through. This puts the leverage back in their court and will result in them putting in a new offer at a lower price, if they are still interested.
A strategy that underscores all of the above pricing strategies involves the actual price point of the property. Agents will often price properties to be within certain search thresholds. For instance, if you own a property worth approximately $600,000, an agent won’t price it for $605,000. Instead, they’ll be more likely to price around $599,000. That’s because your property will show up in more searches. Of course there are always exceptions, and there are no hard rules on this.
Another interesting thing that some agents do is pick seemingly arbitrary price points, such as $299,949 or $533,333. These numbers are simply used to get attention within broader searches. They stand out and make people think. It’s not the most elegant strategy, but if an agent's goal is to get a buyer’s attention, then this is a pretty good trick.