When attempting to sell a home, location and condition are undoubtedly pivotal factors. However, they are not the sole determinants of a sale’s success. In robust real estate markets, properties lingering on the market tend to face uphill battles. A pivotal factor that may hinder the sale of an otherwise appealing property is an inflated asking price.
Homeowners often gravitate towards setting a higher listing price for various reasons:
They aim to leave wiggle room for negotiations, assuming this strategy will lead to favorable bargaining outcomes.
Anticipating a higher return, they believe it will offset the costs associated with purchasing their next home.
The emotional attachment to their home influences their valuation, adding an "invisible" premium to the price tag.
Yet, setting the price too high can have unintended consequences, deterring potential buyers—even those financially capable of affording the property.
Understanding the Impact of Pricing Psychology
The process of pricing, particularly for high-value items like homes and cars, is far from straightforward. The challenge of accurately gauging an item's market value is amplified for items to which owners are sentimentally attached, such as their homes. Prospective buyers may opt out of making an offer not because they find the price unreasonable, but because they perceive better deals elsewhere. Additionally, psychological barriers may come into play:
Buyers might worry that a lower offer could offend the seller.
Buyers expect to have some room to negotiate on any property so may prefer to start with one that is already lower.
There could be a misconception that the seller is already aware of the price being too high.
It's commonly assumed that sellers have received and rejected lowball offers.
For sellers, the listing price sends a crucial message to potential buyers. An effective pricing strategy aligns with both the seller's objectives and market conditions, avoiding the pitfall of creating confusion among buyers.
Strategies for Effective Home Pricing
For sellers seeking desirable outcomes, it's essential to rely on the expertise of a reputable real estate professional who can conduct a comprehensive Comparative Market Analysis (CMA). This analysis considers recent sales in the area and properties with similar features, paving the way for a pricing strategy that:
Supports the seller's financial goals.
Ensures the property sells within a reasonable timeframe, preventing it from becoming stale on the market.
Draws interest from multiple qualified buyers, enhancing the seller's negotiating position.
And remember, when looking at CMA's it is more complex than just trying to repeat history. The resulting price might initially seem lower than expected, but a strategically priced home can still command a premium in the market, facilitating a smoother and more profitable sale.
The Pitfalls of "For Sale By Owner" Listings
Opting for a "For Sale By Owner" (FSBO) approach may seem appealing to some sellers, anticipating a quicker and more straightforward process. However, FSBO listings often suffer from mispricing—either too high or too low. Research indicates that FSBO listings generally sell for less than those managed by agents.
For homeowners eager to sell, engaging a reputable local real estate agent should be the first step. This professional guidance ensures the pricing strategy is poised for success, aligning with the seller's goals and market dynamics.
Using data to guide home pricing is key. In doing so, you need to consider difference in timing and the market conditions when projecting anticipated values. Also, be very weary of using current list prices to set your expectations if those seem to be disconnect with sold prices. Otherwise, you could be setting yourself up for failure.