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The number of prospective purchasers who will look at your
residence is inversely correlated with the listed price.
Think of it as a triangle with higher priced homes at the
top. This will give you some idea of the importance you should
attach to the price you ask for your home.
INITIAL LISTING PRICE
The price you ask for your house at the time it first comes
on the market is extremely important. First, you want to
place your home as far down the pyramid as you can consistent
with getting an acceptable price. Many factors enter into
this decision including how motivated you are to sell, how
confident you are in your (or your agent’s) assessment
of the value of your house, and the state of the housing
market. The current market favors the buyer (I.e. there are
more homes on the market than active purchasers), and this
requires realistic pricing more than would be boom market.
WHY IS THE INITIAL LISTING PRICE SO CRITICAL?
There are several reasons why you should put you residence
on the market at a realistic price.
Your newly listed house will generate the activity, by both
agents and prospective clients, during the first three weeks
it is listed. The sign will attract attention, your residence
will appear on the Multiple Listing Service (MSL), and I
will be advertising your house in the newspaper. Many prospective
purchasers will simply inquire about the price, at which
the pyramid principle comes into play. Many prospective purchasers
will be eliminated simply because they believe the price
is out of their range.
A second important reason for pricing realistically from
the beginning is that your agent may host an agent’s
open house during the first week or two of the listing. This
is an invitation to other agents, from all agencies, to familiarize
themselves with your house with your listing agent present
to answer any questions. The agents will then feel comfortable
showing your house and will be able to show it to only appropriate
clients (I.e. those whose criteria it meets). This not only
ensures a knowledgeable presentation of your house, but it
also minimizes the inconvenience of showings that are unsuitable
for the given client.
However, first impressions are powerful, and if an agent
feels a house is overpriced, he or she is less likely to
suggest it to a client. The initial stigmas of an overpriced
residence is extremely difficult to correct later by a price
reduction.
WHY NOT LIST HIGH TO TEST THE MARKET, AND REDUCE THE PRICE
LATER?
This is partially answered above. Studies show that homes
that are significantly overpriced initially take for longer
to sell, and sell for significantly less than comparable
homes, which are priced realistically from the outset.
If you are serious about selling your house, set an initial
listing price as low as possible consistent with that you
believe you would accept (leaving some leeway for negotiation)
and be prepared to be quite firm during the negotiation process.
Although vendors often say, “ Well, bring me a lower
offer” for their overpriced house, most prospective
purchasers simply do not feel comfortable offering significantly
less than the asking price. And remember the number of prospective
purchasers even thinking about an overpriced house is limited.
HOW DO I KNOW WHAT A REALISTICE PRICE IS?
You may or may not have been keeping abreast of prices in
your area. Remember that there are cyclical and seasonal
variations in residential values—you can’t do
much about the cyclical variations, but the impact of seasonal
fluctuations depends on the urgency with which you want to
sell.
The best information on current market values will come
from reputable real estate agents who are experienced in
your area. Have two or three agents do a listing presentation
of your home to get a feel for their styles and your compatibility.
Although you may be tempted to list with the agent who suggests
the highest listing price, remember the above arguments for
realistic pricing.
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