This question inevitably comes up every time when I am talking with sellers about their asking price.
And the most common statements or questions I hear relating to this are –
“We don’t want to give it away”
“Let’s start higher, we can always go down, can’t go up.”
“Buyers are going to want to low-ball the price, so why not leave some room?”
My recommendation to sellers is always to price firm, regardless.
I understand not wanting to give it away. In fact, I’ve never met a seller that wants to give their home away. In this market though, the selling prices are such that many sellers feel they are giving it away.
Today’s buyers are all about getting a good deal, and the asking price is the first thing they are looking at, even over the location and property amenities. So, if the price is out of line, most buyers today are not even going to look at homes that have too much cushion or flexibility in the price. And sometimes the difference between a properly priced property and an overpriced property is the cushion the seller has in place. My advice, remove the cushion.
As for starting higher on the price and having flexibility to come down later or leave more room for negotiation, you might be waiting a long time for this to happen. The average list price to sales price ratio in Big Bear for today’s sales is 95%. That means if you are correctly priced at $100,000 for example, you can expect to sell for $95,000. And at $500,000, you could expect to sell for $475,000. The problem is, most sellers will price these same properties at $125,000 or more and $550,000 to $600,000 respectively. If you leave 10% or 20% in the price, you will most likely not sell.
Remember, you don’t want to miss the buyer train. The stats show that if you initially overprice your home, you will be chasing the market down, eventually selling for less than if you priced correctly in the beginning. I’ve seen this happen many times to sellers.
And low-ball offers? As a seller, you can determine what you want to sell the property for, not the buyer. What would you rather have, 10 low ball offers with a chance of getting someone that will give you your price, or no offers at all with zero chance of getting the price? Or, to put it another way, would you rather dance with somebody or nobody at all? Unfortunately today, many sellers are sticking to the latter, with little or no chance of selling.
Properties that are priced firm and correctly stick out like a shining star to buyers and other real estate agents. That’s why they get the buyers’ attention, the showings, and ultimately, the sale. How else can you explain some listings getting 15-30 showings per month, while others in the same area are getting less than 5? Or how some listings sell in 7-30 days will others take 180 days or more? Agents will claim it is their brilliant marketing, but it really all about the price.
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Thanks for the article Tyler. One problem I often run into….
Once a seller lists for a firm price, they they will get rigid and not want to lower the price if it is necessary to generate a buyer. They begin to believe the home is worth the price at which it’s listed.
Cameron
Riverside, California
Thanks for the comment Cameron.
Good point. Hopefully, if you’ve done your homework and know the values in the area, that problem will not come up. The property should sell in a reasonable time frame, 90 days or less. That does not always happen. In those cases, I go to the showing stats and/or comps that are getting the activity. If it is priced aggressive, there should be quite a few showings. If you are getting lots of showings, or other properties in the area and price range are moving before your listing is, then the buyers are not agreeing with the price.
We try to be right on every price we set, but that is not realistic. Gotta work with what we see the market telling us in my opinion.