Many times when I list a property for sale, the starting list price is either higher than I believe it should be or higher than the recent comparable sales. And, there are instances when for whatever reason I am not 100% married to a price that aligns with the most recent sales in the area. There are no two homes alike but reasonable adjustments and assumptions can be made in order to zero in on an appropriate listing price. Maybe a seller has a number in mind that's a few thousand higher. That's fine, sellers need to "test" the market a little and I understand that even though they want to work with a professional, and they understand the market data that I am presenting to them, they still want to be certain they are not leaving money on the table. It's just human nature.
My job is to present the facts. . .a review of the competitive listings in the area, recent sales, the general condition of the home compared to buyer expectations, etc. I typically give them a range of what I think their home may be worth and a suggested list price. At that point the seller decides, as is appropriate, what the actual list price for the home should be. It's my decision whether or not I am willing to accept the listing at that price.
Generally people are not too crazy when it comes to pricing. Over the years I have had just a handful who were totally unrealistic but it was usually motivated by other reasons like financial problems causing them to reach for the last hope of digging themselves out of a situation and they wanted to "give it a try." I have walked away from a couple of those, telling the homeowner that I probably was not the best agent for them. I don't want to get a reputation on the market for underpricing or overpricing.
There is a new phenomenon that I find very interesting however and I have to say that it is extremely difficult for the average person out there to wrap their heads around it. Incremental pricing, or the amount of price reduction (or increase) that is meaningful in the real marketplace. In other words, if I list a home at $400,000, and it's in great condition, shows very well, all other things clearly not an issue, but it receives no activity from the market, at what price do we need to reduce in order to reach a new audience?
Even in 2000 a price reduction of $5000 could make a difference in showing activity. Then it became $10,000. Now, I am afraid to say, it seems that I am not seeing an appreciable difference in virtual showings or live showings unless the price reduction is TRULY significant, i.e., over $10,000. I think that the reason is that the way that we shop for residential property has changed dramatically with the advent of listings on public websites. Nobody is searching from $390,000 to $400,000. They are searching $350,000 to $400,000, some are even searching a $100K spread.
I don't seeing buyers being restrained from seeing a property or making an offer if they believe the home is priced even $25,000 higher than their approval limit for financing.
The point of this blog is to say that pricing is very difficult. It has always been a moving target but now the range is way bigger than ever before. The appraisal process is subjective but the appraisers still must use comparable sales closest to the subject property and most recently closed. But, when even an experienced agent goes out there to speak to a potential seller about listing their home for sale, those sellers need to understand that it's a process, not only the entire sale, but pricing. The higher you get the more dicey it becomes. It's fairly easy to price a home under $300K in most areas but unique properties, with acreage, or not in a subdivision, can be true trial and error and it is probably best to "test the market" a bit in the beginning. You have to find the number that gets bodies in the door - it's just that simple. After that, the home has an opportunity to sell itself and the seller who understands that staging and preparation pays off will win the day faster and for a higher price.