Figuring out how to price your home is one of the trickiest parts of selling it. Price it too low and you leave money on the table. Price it too high and you take the chance of it languishing on the market, forcing you to drop the price later—maybe even below market value.
There are three ways to price your home:
Auction, or below market pricing, is designed to catch the attention of the largest number of buyers in the hopes of creating a frenzy of demand, driving the price of the home up through multiple bidders.
Market pricing simply means pricing your home at its perceived market value, based on sales data from comparable homes in your area.
Premium pricing, or above market pricing, takes into consideration the unique characteristics of the property that will incent the right buyer to pay a premium.
Deciding on the right pricing strategy is based on many factors, including type of home, the seller’s timeline and market conditions. Each strategy has its pros and cons, but picking the wrong strategy can mean losing big money.
Here are a couple of cases of pricing gone wrong:
Last fall a home in the Willows neighborhood of Menlo Park went on the market at an auction price of $2.198 million. It sold for $2.3 million within 24 hours. Sounds great, right?
Until you learn that the same home sold four months later for $2.5 million. Ouch! The seller lost $200,000 by choosing auction pricing.
Then there’s the Barron Park house that was priced at a premium of $2.798 million. That strategy might have worked—except that just a few days before the home went on the market the Palo Alto Weekly published a story about possible toxic risk to homes in the area. (hyperlink: http://www.paloaltoonline.com/news/show_story.php?id=25128) That fear of risk affected the value of the house and it sat on the market 30 days until the owners dropped their price. It sold two months after that for $2.6 million. In a seller’s market it took 90 days to sell at almost $200,000 below the original listing price. A better pricing strategy would have likely sold the house more quickly at a higher ultimate price since the longer a house stays on the market, the more buyers are left to wonder what’s wrong with the house.
So how do you know what to do? How do you price your home to sell quickly for the most amount of money?
An experienced realtor who understands pricing strategy, your city, your neighborhood and changing market conditions can help you pick the strategy that fits your needs. Call me to learn more about pricing your home and let me help you decide the right pricing strategy for you.
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