These days I am finding that the "pricing talk" is one of my least favorite parts of the job. I feel for my clients when I have to tell them that their house is not worth what they thought it was or what it used to be. It's especially hard when I have to tell them that it's worth less than they paid. And I know how they feel because I am in the same position as they are. Luckily for me, I don't need to sell my house.
Usually, after I deliver the bad news about where I think we should price the home, I hear one (or more) of the five "buts":
1. "But the other agent said it was worth x" (a higher number)
2. "But my neighbor sold his house for x" (a higher number)
3. "But my house is much nicer than the ones you're comparing it to"
4. "But if I price it that low now, then the buyer will still negotiate it down and I'll make even less money."
5. "But why can't we just start a little higher? We can always reduce it later."
All of these are natural reactions under the circumstances. But these "buts" can lead to pricing decisions that will ultimately cost you money. Here's how to avoid these five pricing pitfalls:
"But the other agent said it was worth x".
I don't want to say that there are agents who will inflate the price to get the listing, but it can happen. More likely the agent is throwing out a ballpark figure without having (yet) done an in depth competitive market analysis. Don't ever hire an agent based on the price he or she gives you. Your choice of agent should be based on experience, track record, knowledge of your specific market and the marketing plan for your property. Above all it should be based on trust and confidence that the agent has your best interests at heart.
"But my neighbor sold his house for x".
When? Three years ago? The fact is, unless his house is almost the same as yours and he sold it last week, it's an irrelevant comparison. The market has changed and the hard reality is that your house is almost certainly worth less now. You need to do (or make sure your agent does) the research to determine the value of your house today. You should only be looking at comparable homes that have sold in the last three months. AND you should be looking carefully at the homes that are on the market today, as this is your competition.
"But my house is much nicer than the ones you're comparing it to".
We all become emotionally attached to our home. It's our refuge and our haven.We've added our personal stamp. We've made lots of wonderful memories there. But when you go to sell your house, you have to emotionally disconnect. This is not your home anymore. It is a product for sale and you need to look at it objectively vs. its competition. Then price it accordingly.
"But if I price it that low now, the buyer will still negotiate it down and I'll make even less money" .
This is one of the most common "buts" and I have to admit I've been guilty of it myself. The problem with pricing a house higher than it should be because you "can always negotiate" is that it will attract less buyer interest because it doesn't measure up to the other houses at that price point, and you won't end up having anyone to negotiate with. It seems counter-intuitive, but pricing it lower may actually net you more money in the end, because it will attract a lot of interest and potentially multiple offers and a bidding war.
"But why can't we just start a little higher? We can always reduce it later."
This is the slipperiest slope of all if you are in a depreciating market, because you end up chasing the market down and are always higher than you should be. You will end up months later with an unsold house at a list price that is much lower than the price you could have sold for if you had only priced it right from the beginning.
The other thing to keep in mind is that a new listing gets the most buyer interest and activity in the first 2-4 weeks after it goes on the market. If it is priced too high, you are only helping one of your well-priced competitors make a sale. And your home will be invisible to those people who are its most likely buyers, because it is out of their price range. When it doesn't sell after a few weeks it becomes "stale" and people begin to think there's something wrong with it. So you reduce it, but you're still behind the market, and so on.
Like it or not, in this market pricing will be the deciding factor in whether or not you sell your house. If you really need to sell your house, then you need to price it so that it is the best house at the best price, and not a penny more. End of story.
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