How important is pricing really?4th January 2021
This cannot be understated and is best described if done incorrectly as, the kiss of death.
The market moves fast.
There is serious competition that helps sellers.
Sometimes this competition is misinterpreted as a way to sell a home for more than it is worth. Truth be told it is a sellers market, but let’s not get crazy people.
One major variable to consider is the list to sale price ratio. This means what percentage of the list price at home sells for ultimately. The other thing to unpack is whether or not it’s list price or original list price. Let me explain.
If you originally list a home for $100,000 and you drop the price down to 95 and then down to 90 and it sells for 90 then the list the sale price ratio is 100%. But the original List to sale price ratio is 90%.
With that being said, what we are observing is a shrinking or tightening of the list to sale price ratio. What this means to you is if you overshoot pricing your home by just a little bit you may not get any offers. Many buyers in this situation wonder, “why doesn’t someone just send us a lowball?”
Answer, because people don’t really do that anymore. Not sure exactly why. There are situations where my buyers and I decide to undershoot an offer as a strategy but as a general rule of thumb it doesn’t happen much anymore.
What most agents used to talk about when pricing a home is how much higher they plan to list the home for with the expectation that the sale price will be lower. This is an old way of thinking and is not a successful strategy.
If you are planning to sell your home for less than it’s listed then you have a sales strategy that’s way more reactive than proactive and isn’t suited for real estate sales in 2020.
Our strategy to get the most bang for the buck is to put in a fair amount of our time and energy, actually most, to prepping the home and getting it 100% ready for market (this is an extensive, attention to detail, step-by-step process built for each Client’s time and budget available). Then, we still price the home competitively. In a way that we expect to generate so much interest that we are able to leverage multiple offers to potentially drive up the price and/or negotiate in great terms (blog coming on terms). You just can’t do that when your home is priced too high.
The other variable that we watch is DOM or days on market. Because it is widely known that the market is “hot“ and it’s a sellers market it only takes a week or two before buyers see a property as “shopworn.” What that means to you is if your home doesn’t sell in a couple of weeks all of the potential buyers will be asking “why?”
They walk into the door with the expectation that something is wrong with the property and they view the home through the lens which sours the impression. This is when you have entered the kiss of death zone. If you remain here for a few more weeks or even months then you can normally expect to have poor results.
Now this situation might be different if you’re selling a 2 1/2 million dollar unique waterfront property. But for everything else this is pretty much right on.
Now let me be clear on this, I don’t price the homes that we list. I do my best to share market details with my Clients so that they make the right decision. But it is their decision so sometimes they decide otherwise. That’s why we are very clear from the very beginning about pricing strategy and its importance and how we will quickly adjust if we are not getting the results we desire.
If you have a home and you find yourself in a position to drop the price do it fast. The slower you move on price correction these days the slower and lower your home will sell for.