Settling on the Right Price
Pricing is one of the most important steps of the sales process. We don't want to ask for too much and scare away qualified buyers. Even more importantly, we don't want to ask for too little and leave money on the table. Here are several things to keep in mind when setting your price:
Put yourself in the buyer's shoes Consider the position of the buyers who will be looking at your home. Is it a buyer's market or a seller's market? Is it an easy time to secure a good interest rate or is it a very difficult time? Is the school year starting up soon? Is the holiday season right around the corner? If you can anticipate the thought process of the buyers looking at your home, it will be much easier to set an attractive price.
Play the odds If you look at market statistics for any area, you will realize that in any given week, only a small percentage of available homes on the market actually sell. Usually, this number is less than 10%. This means that in order for your homes to be one of the homes that sells next week, you would need to be priced more competitively than 90% of available listings. This is a slight oversimplification, but the principle is sound. If you want your home to sell, price competitively (top 10%). There are no points for second place.
Price within the brackets Bracket pricing is the art of setting your price to be optimally positioned within natural price range cutoffs. When a buyer is looking for a new home, (s)he tends to define his/her price range with big round numbers. For instance, (s)he may say, "I can spend between $225,000 and $250,000." The buyer's agent will then pull any listings that fit the buyer's criteria within that price range. Any home that is priced at $249,900 will show up at the top of that search query (and likely look very good compared to homes that are priced up to $25,000 less). However, a home priced at $251,000 will never be seen by the buyer or the agent. The difference in the two asking prices is negligible, but the effect that it has on the seller's potential buyer pool is dramatic. Set prices towards the top of brackets, never at the bottom.
Stay logical Generally, a buyer is not going to pay extra for the good memories that you've had in your home or the difficulty that you will have leaving that home. Try not to conflate sentimental value with market value.
When Is It Time to Reduce the Price?
A price reduction is one of the most effective ways to bring new buyers to the table and drive up interest in your home. Here are four times when it makes sense to reduce your home's price:
Activity has slowed to a crawl When a home first comes on the market, there is usually an initial burst of activity as buyers get acquainted with the new home. If at the end of this initial burst, no one has expressed serious interest, it's usually a good idea to reduce the price to generate a new burst of activity.
Prices are falling If prices are falling across the market and competing properties are cutting prices to attract buyers, it's important to keep pace. Keep in mind that making one meaningful price cut early on can save you from making several as the market continues to depreciate.
Buyers are disappearing If potential buyers are disappearing form the market, it's only a matter of time before prices head downward. Buyers can leave the market for several reasons. If the market experiences turbulence, if interest rates go up, if taxes go up, if unemployment goes up --all of these can force buyers out of the market. When you see this happening, it's time to drop the price.
Agent and buyer feedback frequently references price If one buyer says the home is overpriced, that buyer might just have a poor sense of market value. On the other hand, if every buyer and agent who sees the house mentions the high price when giving feedback, it's time to drop the price.
Three Ways to Get More Money Without Raising the Price
When you sell a home, there are several ways to get more money from the buyer without negotiating a higher price. Here are three common ways:
Inspection & repair costs Your home will be inspected as part of the escrow process. Some repairs are essential and non-negotiable, but others can be covered by either the buyer or the seller. It's never a good idea to blow up a transaction over relatively inexpensive repairs, but, when appropriate, we can ask the buyer to chip in for repairs.
Escrow Escrow fees vary from company to company, and there is a large disparity between good and bad escrow companies in terms of quality. For this reason, it's usually a good idea to insist on selecting the escrow company. Most buyers are unaware of the impact that this can have on the transaction, and are likely to let you select the escrow company without much of a fight.
Furniture and fixtures If you have furniture or fixtures that are not included in the sales price, you can negotiate the sale of those items during the transaction. For instance, if you have a patio set that goes perfectly with the outdoor awnings, the buyers may be willing to pay extra to get the patio set thrown into the deal.