When it comes to putting your home on the market, there are a number of theories as to how you should come up with a good listing price. Some price high and hope to get close to asking, others price it correctly and some price it low looking for a bidding war. In recent years, we’ve been seeing a lot more of one of those theories in particular…I’ll let you guess which one.
Before determining which method you want to use, you need to make sure you know these 3 things: The market value of your home, the minimum amount you’re willing to accept and your timeline. With those in mind, now we can break down the different pricing strategies. Although there are no bad strategies, it is possible to execute them poorly. It happens too often and it makes me cringe when I see it…unless I’m the agent bringing the buyer. Then it’s high fives all around.
This approach is generally taken when the seller is not in a rush to sell. If the property is overpriced, you’re not going to see someone jump on it on day 1. Buyers will know it’s overpriced and they’ll feel like a low offer will be rejected if it has just been recently listed. They’ll wait a bit before lowballing. The benefit of this approach is that someone may see it and actually feel like it’s worth the extra money. This outcome is not common, but it happens from time to time. The danger of pricing high is that your property will sit. When a house sits on the market for a long time, people lose interest (known as market staleness) and can even start to wonder what’s wrong with it. At a certain point, even a price drop may not breathe new life into the listing. Sometimes homes that are priced too high end up selling well under market value. If you plan to price high, don’t let it be excessively high. This can end up scaring off those who were willing to make a reasonable offer.
This used to be a strategy for those who needed to sell quickly. Now it seems to be what everyone is doing. And buyers HATE it. Like with pricing high, it’s all about being reasonable. A number of Realtors like to suggest that you can’t price a property too low because it will generate even more offers, leading to a sale price way above asking. This is wrong. You can price a property too low. Will you get multiple offers? Sure. But you may miss out on several buyers that had serious interest. Far too often I’ve heard buyers say that they won’t make an offer if they’re in competition or when there are too many offers, they’re just not interested anymore. Buying is stressful. Buying when there are 10 other offers is depressing. Some want nothing to do with that. If you price low, but keep it in the realm of reality, you can still get multiple offers and you’re less likely to push interested buyers away.
Another thing to remember is that there’s always the possibility that you don’t get an offer anywhere near what you want. There’s nothing stopping you from rejecting all of the offers and raising the price, but agents and buyers hate it. The last thing you want to do is annoy your target market. That’s just bad business. If you want to list low, go for it…just don’t list below the minimum that you’re willing to accept. With the Guelph market slowly shifting to a more balanced state, there’s no guarantee that your house will see the same bidding wars that we had in April 2017.
I’ve seen homes sell below market value just because the seller and their Realtor priced it too low. On the bright side, getting multiple offers probably made them feel like things went well. Just remember that $40,000 over asking means nothing if it’s $20,000 under market value.
Price it Right
Believe it or not, this is an option! Not many people go with it anymore, but it’s a smart approach. It often results in a sale price that’s close to list price and, with the right marketing, multiple offers is still a possibility. There’s no buyer animosity due to a ridiculously low price and they don’t avoid it because it’s overpriced.
The right approach for you is the one that aligns with your goals, so make sure you take your timeline and the minimum you’re willing to accept into consideration. If you’re looking to put your home on the market, feel free to get in touch! I’d be happy to discuss pricing and the rest of the selling process.