The Psychology of Real Estate Series, Pt. 1 – Strategically Pricing Your Home

No matter whether the market is favoring buyers or sellers, pricing a home is one of the hardest things to do. There are many factors to consider when determining a realistic and savvy list price. Real Estate is not just an analytical endeavor. While people are complex and choose a home based on a variety of factors, list price plays a huge role in it! You and your agent want to be strategic when pricing your home, to leverage your power when you first launch it onto the market.

Here are some things to consider when deciding on list price:

When do you want or need your sale finalized? Are you hoping to get an offer right away? Knowing your preferred timeline helps when deciding on list price strategy. In the current market, if you want to get your house from active to pending as fast as possible, it makes sense to list towards the bottom end of the anticipated market value range (what you believe buyers are willing to pay for it, given the current market conditions and recently sold houses nearby).

Also, doing it this way tends to get more buyers in the door right away, and usually kicks off a situation where buyers are competing with one another, creating a multiple offer situation. It is similar to the “sale” mentality. When buyers see a home that is listed competitively, many tend to want it more, and decide that they have a better chance of competing with others, versus going for the other house that is listed 10-15k higher than yours. Sometimes when you list in the top end of the anticipated market value range, it can turn buyers off – even ones who are willing to offer that same, higher amount to beat competing offers!

“But, Keryn, what if people don’t offer over list price, and we listed at the bottom end of the range?” I would never recommend listing your home at a price you didn’t want to sell it for. I firmly believe if you list towards the bottom of what you anticipate getting, that the offers will come in at true market value. If you go this route, it is wise to have an offer review date so that the home can get enough exposure and give agents enough time to craft and submit an offer. Worst case scenario, if no offers are received by your review date (sometimes these things happen!), make sure your agent removes the review date from the listing to avoid making the home look unappealing, like no one wanted it!

Other benefits to this strategy include:

• Possibly gaining a back up offer. A backup offer is a second buyer who automatically gets the house if the winning buyer backs out. Having a backup means you don’t have to go back on market, which means you don’t sit longer and risk having to drop the price to get new buyers back through or have someone try and negotiate the price down. 
• More inspection negotiation leverage. A back up offer increases your power in inspection negotiations with your winning buyer as well. If a buyer gets too picky on inspection repair requests, it is nice to be able to remind the buyer’s agent that there were multiple offers and that there is a back up offer pending. They know if they back out it isn’t as big of a hassle for you – there’s another eager buyer waiting to get the house!
• It is less likely to receive a less-than-list offer. Buyers know it will likely go at or over list with other buyers competing against them, especially since this is designed to get offers in the first week on market. 

If you have more time, you might rather list towards or at the tip-top of the range we think we can get. This strategy also has its pros. It can be overwhelming to sift through many offers and hard to let down the buyers who lose the house. It also tends to filter out buyers who aren’t serious enough to see the transaction all the way through. If you go this route, I recommend having a price reduction plan in place so that the house doesn’t sit too long if you don’t get an offer. You don’t want the listing to go stale, and you don’t want to turn buyers off by seeming unmotivated. Are there exceptions to this rule? Yes. Is your home valued much higher than the average sales price, appealing to a smaller amount of buyers? Is your home a unique property, that will sing to a particular buyer who might not be looking at the time we list? These are things to consider while coming up with a listing strategy!

Coming up with list price is one of the most challenging parts of listing, in my opinion. You don’t want to come on too low, but you don’t want to turn buyers off by coming on too high. Coming up with a list price is part art and part science. There are things we do to make sure we are making our best estimate of what people will be willing to offer for your home. We look at specifics of the home (size, condition, location), and we compare it to homes sold recently nearby (as an appraiser will do later in the process). We also look at the current market conditions. Are there a lot of buyers? How many homes are we competing with nearby? 

Coming up with list price can be challenging, but it can also be fun! I just urge people to be intentional with how and why they list their home for the price that they do. I love presenting my clients with a variety of options and empowering them to decide which route works best for them.

To read more about making your home as appealing as possible, check out my blog post “Ten Details That Create An Amazing Showing Experience!”