Pricing To Sell And Still Make a Profit
The asking price you set for your home significantly affects whether you will profit in the sale, how much you will profit and how long your home will sit on the market.
Your real estate agent's knowledge of the overall market and what's selling - or not selling - will be invaluable in helping you determine your list price. The objective is to find a price that the market will bear but won't leave money on the table. Here are some points to consider:
Timing The Market
Time is not on your side when it comes to real estate. Although many factors influence the outcome, perhaps time is the biggest determinant in whether or not you see a profit and how much you profit.
Studies show that the longer a house sits on the market, the less likely it is to sell for the original asking price. In fact, statistics indicate if you haven't sold in the first 30-days, you're not likely to sell within 5% of your asking price. Obviously, you will need to re-evaluate your pricing strategy. Therefore, if your goal is to make money, think about a price that will encourage stronger buyer activity.
The Correct Pricing Strategy From The Get Go
A correct pricing strategy actually puts more dollars in your pocket. You may be surprised that 100% of homeowners believe their property is worth more than fair market value.
Many sellers ask if they can just try a higher price for a week or two. Unfortunately, the first week or two generates the highest activity and buyer interest on a property. An unrealistic higher price will actually lose you buyer activity at the most crucial time during the marketing process and once buyers have gone … they’re gone.
Take a look at the following video graph, you’ll see that the first two weeks represent the highest level of buyer interest:
Don't waste the first week or two, by trying a price that's too high, you'll lose the price battle. Avoid the dangers of over-pricing your home, it will cost you potentially thousands of dollars from the net proceeds in the sale of your home.
Why Correct Pricing Is So Important
When an organization such as Gallup conducts polling, a small sample of a thousand people (respondents) provides a relatively accurate indication of the polling subject within a margin of error of plus or minus 3%. The sample size for this data was half a million, so the following statistics are 100% accurate to the enth degree.
Real estate research was recently conducted (2016/2017) to discover the most precise information on the effects of incorrectly pricing a home, then followed by a series of price reductions in order to pinpoint the correct price. Here’s how dramatically your sales price will be negatively impacted. The results are not only alarming, but should be financially scary to every home seller:
Obviously, the financial loss is devastating. By starting with too high a price is simply a bad financial strategy. Should the price be too high and a price reduction is deemed necessary, holding onto price for too long can be financially catastrophic for sellers.
Your first two to three weeks on the market are the most crucial, if you have not sold your home during that period your agent should be recommending a price adjustment. Just like a financial advisor, it’s your agent’s job to read and interpret the market and convey that important information to you in order to make your pricing decision from a position of knowledge and strength.
As buyer interest subsides at the two to three week mark and you’ve not sold your property, you will likely need to reposition your price. Your goal should be to have the market chasing you rather than you chasing the market. The minute you start to chase the market by delaying a price adjustment, you’ve lost the financial battle and you will lose substantially more money by holding on to price thinking there’s a great offer just around the corner. The reality is: tomorrow never comes.
If it appears that a price reduction is a wise decision, act immediately in arriving at that conclusion, otherwise price retention will be a costly mistake.
Value Versus Cost
Pricing your home to sell in a timely fashion requires some objectivity. It's important that you not confuse value with cost - in other words, how much you value your home versus what buyers are willing to pay for it. Don't place too much emphasis on home improvements when calculating your price, because buyers may not share your taste. For instance, not everyone wants hardwood floors or granite counter tops.
The KISS Principle: Keep It Simple
Because time is of the essence, make it easy for the buyers to buy. Remain flexible on when your agent can schedule showings.
Also, avoid putting contingencies on the sale. Though a desirable move-in date makes for a smoother transition between homes for you and your family, it could cause you to lose the sale altogether, particularly for the one-in-three buyers who comes from out-of-town. Often, buyers who are relocating require urgent possession and holding out on possession to convenience you, may be a deal-breaker for your buyer.
Remember: Moving is an enormous inconvenience even at the best of times. Flexibility is crucial to a successful sale.
Contact Elegant Homes and Gardens
We certainly hope you recognize the complexities of selling your home. It's also our sincere hope that, when you need the professional guidance and advice to facilitate the successful sale of your home, you'll contact Bob Reid to achieve your real estate and financial goals in your transaction.