The price. It’s the first thing buyers notice, and the last thing sellers worry about before they go to sleep.
As a Realtor®, you know that it’s your job to get your client the best price possible. But it’s important to follow the right advice as to how to get there, and set real estate values properly.
The Dangers of Pricing Too Low
Some would say that the right price is the one that makes the sale. There are some elements of truth there, but it doesn’t tell the whole story.
The reality is if you aim too low based on surrounding real estate values, and the house sells quickly (which is often the point of a low price), the odds are really good you could have asked for more. You’re leaving money on the table – for both you and your client.
A motivated seller who “just wants to sell this house ASAP” may say they are ok with it. Their bottom line may be to simply sell this house so they can quickly buy the new one, or move to another city before their new job starts. And that’s fine, to a point. Their yardstick of how well you did your job is how quickly you did it.
But that doesn’t mean you should lowball. Even motivated sellers want the most money possible. If they even have the slightest inkling you could have done more, it will leave a bad taste in their mouth. That taste will cost you referrals.
But, if you are somehow able to close the deal in the timeline they give, AND get more money than they hoped for, you just went from a Realtor® to a real hero.
The Dangers of Pricing Too High
Overpricing is even more dangerous because it can burn you several different ways. You may get the listing, but you likely won't get the sale. Setting your price too high compared to other real estate values will have different effects in different markets.
What happens when you’re priced too high in a buyer’s market? You get ignored. “In markets where sellers are competing against one another to sell their properties, buyers can afford to be more selective and find inventory within their desired price range,” wrote Realtor®, Dawn-Lee McKenzie.
“If your listing price is higher than comparable homes on the market, buyers tend to move on to other listings without even giving your home full consideration.”
Conversely, if you price too high in a seller’s market, a higher price is actually costing you the ability to get more. When you list in a highly competitive environment, the goal is to get a higher price through competition, not the actual asking price. You will have more luck by listing a lower price and starting a bidding war than you would asking the high price from the get-go. Your (properly determined) lower price is what will help you get more attention from people browsing.
The Importance of the Right Data in Finding Real Estate Values
No need to reinvent the wheel. When setting your listing price, use good old fashioned comparables and trends in surrounding real estate values. For example, don’t use price-per-square foot as any indicator of… well. Anything.
“Price per square foot is the equivalent of putting a cheeseburger, fries, and Coke into a blender and trying to charge $5 for the resulting ‘Happy Meal’. To lean on it as a means for supporting a valuation is lazy,” wrote Sam DeBord, of GeekEstate.
“It ignores view, geographic orientation, floor plan, upgrades, nearby amenities, and property condition and gives the impression that it can encompass them all with a single number.”
Of course, a lot of new clients will only want to talk to about the price. They may tune out of everything until you say the numbers they want to hear. But you’re the expert, not them. Always let the client know the dangers of underpricing and overpricing, and emphasize the reliability of the data you used to come up with this number.
In the end, as a professional Realtor® you have an obligation to price appropriately. Underpricing to sell more quickly, or overpricing to win a listing and then losing the sale, are both breaches of your professional duty. Instead, focus on giving the right price based on real estate values, and let the client know why you chose it.
Once you’ve wowed your clients, don’t forget to leave them with your postcards or business cards to give to their friends. If you need new materials, you can easily create your own design online and give your branding a quick refresh.
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