Intelligent Pricing, Timing, and How To Avoid Death By a Thousand Price Cuts

Hello, person of taste and distinction. This is a Tampa Bay Real Estate Insider Newsletter. Created to educate, inform, and empower you to take charge of your real estate or investment journey.

Pricing a home for sale is as much art as science. You heard me talk about how important it is to work with a real estate professional who’s also a National Association of REALTORS®Pricing Strategy Advisor (PSA)—someone who knows the market and how to use the numbers to market your property accordingly to maximize your profit.

We’ve all seen overpriced homes in Tampa Bay. In some markets, pricing as little as 5% over fair market value can significantly increase the time it takes to sell or, in some cases, never sell at all.

Long story short: Overpricing – One star, don’t recommend, and here’s why.

PRICING YOUR HOME TO SELL

Three facts you need to know.

• Fair market value attracts buyers; overpricing never does.
• The first two weeks of marketing are crucial.
• The market never lies, but it can change its mind.

Fair market value is what a willing buyer and a willing seller agree by contract, which is a fair price for the home.

A wide range of reasons can impact values and I will expand on that topic in other articles, but the two biggest are location and condition. Generally, fair market value can be estimated by considering comparables—other similar homes that have sold or are currently for sale in the same area.

Sellers often view their homes as unique, which tempts them to put a higher price on them, believing they can always come down later.

However, that’s a serious mistake. Overpricing prevents buyers who are eligible to buy the home from ever seeing it. Most buyers shop by price range and look for the best value in that range.

PRICING “ON THE BRIDGE”

Before I dive into the “time” factor, I want to address another critical topic regarding pricing.

I have seen an alarming trend of pricing homes like they are displayed at Nordstrom – you know, with many nines at the end.

When buyers shop by price range, they never put $0 to $499,999. They would usually put $0 to $500,000. Now, take a different buyer looking at properties in the $500,000 to $600,000 range. The house, priced at $499,999, will NEVER SHOW for them. Dipping into both ranges significantly increases the chances of selling it.

So, please, don’t price your home or any other property like an H&Mt-shirt.

Pricing on the bridge might not work in 100% of cases, but when it does, it increases your chances of getting more traffic and eventually selling your home faster and to the right buyer.

TIME IS A BIG FACTOR

Your best chance of selling your home is in the first two weeks of marketing. Your home is fresh and exciting to buyers and their agents. With a sign in the yard, full description and photos in the local Multiple Listing Service, distribution across the Internet, open houses, broker’s caravan, ads, and email blasts to your listing agent’s buyers, your home will get the most extraordinary flurry of attention and interest in the first two weeks.

If you don’t get many showings or offers, you’ve probably overpriced your home, and it’s not comparing well to the competition – the competition being other homes for sale in your area.

Since you can’t change the location, you’ll have to either improve the home’s condition (spend more money) or lower the price. Of course, if your property is unique, the time may vary, but the principle still applies.

DEATH WITH A THOUSAND PRICE CUTS

Yes, I coined the expression! This is usually the fate of overpriced homes. Seller lists their home 10-20% over fair market value, and the seller, sometimes even the agent, thinks a payday is coming soon, but it never does. Two weeks later, we see a price cut. Another month passes, and we see another price cut.

The house is still overpriced. The seller is frustrated, the agent is in trouble with their client, and the general audience is staying away from the overpriced listing because they know better, still can’t afford it, or are buying other properties in the same area.

There are two possible endings to a story like this. First, the listing expires and goes off the market, and nobody wins.

Second, the house finally sold, but because it had been on the market for 246 days, the buyer agent had leverage and negotiated a deal about 10-15% below fair market value. The seller, tired and frustrated by the entire ordeal, agreed to a lower price—the buyer won.

CONCLUSION

The market can always change its mind and give your home another chance, but by then, you’ve lost precious time and perhaps allowed a stigma to cloud your home’s value. Intelligent pricing is essentially a business and marketing strategy in which many things, tangible and intangible, are considered.

If you or anybody you know is getting ready to sell their home, I am here as your trusted resource. Reach out; let’s start a conversation.

Until next time.