Realistic pricing will get your home sold faster and for more money than offering it for sale where you hope it will sell and where it would be above market value.
Right now, the Silicon Valley real estate market is titled steeply in the seller’s favor. Some home owners have the idea that they can ask any price they want and buyers will eagerly take it. In reality, that strategy will backfire! Not only do buyers not jump at the chance to purchase an overpriced piece of real estate, they are also unlikely to come back after a price reduction.
Realistic pricing – or better
The line about only having one chance to make a good first impression is true in real estate sales, too.
In today’s market, home sellers are opting more and more to place their home lower than where they believe it will sell. This tends to attract more offers than realistic pricing (often called “transparent pricing”) and ultimately can get a higher sales price in a shorter amount of time, too.
Going low is a bit of a gamble. Sometimes the market can change, or for some reason buyers don’t respond as expected. My usual advice to my clients is to not price it lower than you would actually accept.
For example, let’s say your house is worth $1,500,000, most likely. Some sellers would list it higher, some right at list price, some a little lower, and some crazy low – a price they’d never take since it’s far below market value. I’ve seen houses worth about this offered at prices like $999,000. I tell my buyers that this is “mirage pricing” since it’s only an illusion that the home can be bought for that amount. Needless to say, most of the people bidding on that home are probably not going to be anywhere near $1.5 mil. The gamble is on whether getting 35 + offers will result in it selling for $1,700,000. And it might. But no guarantees. You may get the same result If it goes on the market 5% below what you think it’s worth ($1,425,000) and you get 10 offers.
Each property, area, seller, and conditions may vary. (Home buyers need to be aware of this strategy, too, so they don’t get confused and waste time writing offers on homes with mirage pricing.)
Realistic pricing means you will:
- Sell faster.
- Sell for more money.
- Improve the odds of selling with no contingencies of any kind.
- Increase the likelihood of a short escrow.
When sellers price the home at what they hope it’s worth, the property can take much longer to sell and ultimately sell for less than it should as compared to the comparables.
Here’s a true story to illustrate:
About a year ago I talked with some sellers who wanted to price their home far higher than it seemed to be worth. (They also had other showing and selling conditions that seemed to reduce their odds of success and informed me that they didn’t mind if it took a while to sell.) They were super nice people, and I actually loved their house, but I just could not make the property sell for what they expected or wanted to “try”. I politely declined and wished them well. That home is now under contract, but it has taken a full year off and on the market (current days on market were over 90) and more than 20% in list price reductions to get it pending. (The sales price is not yet published, but with 3 months on the market this time, it is likely to be less than list price.)
In that case that I just described, the price they wanted to list it for was the major obstacle, but not the only one. Had everything else been as it should, that home would have sold for more than the current list price by at least 10%. When sellers are unrealistic about the amount, they are sometimes also unrealistic about things like showings, inspections, and other relevant criteria when we are trying to get them the best deal possible.
Realistic pricing is truly the minimum you need when trying to obtain top dollar right now. It is essential to get the price right. This is the whitest hot market I’ve ever seen in my career, but not every home will sell even now. It’s got to have realistic pricing – or better yet, put it on the low end of the spectrum of what you would accept, a bit under market value, and watch it get bid up. (The market can change, so this may not always be the case.)
Remember, your home is worth only as much as qualified buyers are willing to pay for it (and no less than unpressured sellers are willing to part with it for).
Catching the crest of the buyer-interest wave
Timing is critical!
The majority of buyer activity occurs in the first two weeks after a home goes on the market, and peak sales activity occurs within the first 10 days. Buyers who see a property at a non-competitive price will not be back for a second look. The longer your home stays on the market without an offer, the more it risks taking on a “shelf-worn” appearance, reducing your chances for closing a sale with a full-price or higher buyer. It also increases the odds that you will need to consider a price reduction to get it seen – and will have less traffic with that lower price.
Sell your home in 2021 (on the Valley of Heart’s Delight blog)