Right now, in our market, the data is pretty darn clear: If you price your home 5% or more too high, you won't get a deal, and you may not get any offers.
Lots of homes are selling quickly for a sales price within 5% of their most recent asking price. Sometimes that asking price is for homes that are brand new to the market; sometimes that price is the last asking price after a price reduction. Either way, when a seller's price is within 5% of buyers' perceived value, the house sells.
In competitive price ranges, buyers are showing that they are very willing to make an offer on a house that is priced lower than a similar home, and simply ignore the higher-priced home. If it's your house that is the higher-priced one, you'll never hear from the buyers at all.
Consider this scenario: Seller lists for $500,000. Buyer has been in the market, doing research and checking out the options, and is comfortable making an offer for about $460,000. Buyer loves Seller's house, but there's another house for sale that is listed for $480,000, even though it only has a two-car garage, not the three-car garage that Buyer really wants. Which house gets Buyer's offer? Usually the lower-priced home. A Buyer who is looking for a little lower price is more likely to trade off something else that the Buyer wants but doesn't need.
What if the Buyer is willing to offer full-price on a $500,000 house right now? Then the balance probably tips toward Seller's $500,000 house because it has "everything" (in this example, the three-car garage) that the Buyer wants.
But if both houses have three-car garages, and one is overpriced by $20,000, then, obviously, the $500,000 house isn't going to get an offer!
At times other than this present moment, under other market conditions, this difference between last asking price and ultimate sales price is larger than the 5% range than it is now. At the moment, however, in our market, especially in a market where there are currently 1) solid or advancing prices, 2) low inventories, and 3) selective buyers who are very value-conscious, the difference is very narrow.
Of course, this analyis is not the only important consideration in pricing a home. There are many factors that need to be considered and weighed when we consider the relationship of current market conditions to a particular seller's needs and interests. Nevertheless, it is always part of the equation. Right now, it's crucial to any seller's hopes of selling for the best price in the shortest time possible.
Now, I just did a presentation for a rather belligerent fellow who insisted he had to be out by November (11 weeks away), so he wanted me to tell him the "real" price. He also insisted that he did not want to lower the price after a few weeks or a month: he needed out.
The comps on his property are unusually clear, and point to a very specific "correct" asking price. After showing him that data, and the data that show that a 5% over-pricing in this market would kill his chances, I gave him my number. He said, "That sounds fair".
Guess what? He just listed with a different agent . . . for exactly 5% more than my suggested price.
For his sake, I hope what the market is telling me is wrong in his case and he gets exactly what he wants. I've certainly been wrong before! In any case, I'll let you all know if his house sells. In the meantime, my money is where my mouth is: the market says that 5% overpriced is 5% too much to ask.
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