The Importance of Intelligent Pricing
When it comes to pricing, it’s not about me or any other agent; it’s about the market. The state of the market is the determining factor for pricing. Neither you nor I make the market. My job is to show you how to get your home sold in the market. I will bring you a solution and show you how to help your own cause.
If a buyer is to buy your property, there is what is commonly known as the concept of a “window of opportunity.” This means when a property first comes on the market it attracts attention from those agents who are currently working with motivated buyers or those agents who are motivated by the price to go find a buyer. If any agent or their buyer believes that a property is poorly priced, the property loses its opportunity and doesn’t draw their attention. It basically gets written off from the beginning. Once this happens it isn’t easy to get those agents or buyers back, even with a series of price reductions or home improvements. First impressions are the original pictures framed in the mind and heart and they are usually lasting ones. When memories and opinions get set, they are typically difficult to change.
The first time a buyer sees a property is called the “window of opportunity” because it’s the single best chance to create the impression that will sell the property. It’s the best marketing message you, as a seller, can send: we’re priced right and serious to sell. If a property isn’t appropriately priced for the market from the outset, you will likely miss this important first impression. Sellers only get one chance to make a good first impression. Making the wrong impression will cost sellers time and money. You want to be sure your property is priced “in the market.”
The Tale of Two Markets – Graph 1
Just because a property is on the market doesn’t mean it’s “in the market.” In every market, there are two markets. There are properties that are priced well enough and in good enough condition to attract interested buyers. Those properties attract offers and sell. Then there are properties that are overpriced or are in less than ideal condition that don’t attract buyers and sit on the market.
Sellers’ Market – Graph 2
When we are in a sellers’ market, a lot more properties are “in the market.” In such a market, we see a lot of multiple offers and it isn’t so much whether a home will sell, it is a question of how long it will take and how much it will sell for.
Buyers’ Market – Graph 3
When we are in a buyers’ market, many properties aren’t really “in the market” at all. There is a lot of inventory because there are not as many buyers. The buyers who are looking expect a great value – a great home at a great price. The buyers really start to be really picky because there are so many options available.
Stay Ahead of the Market, Don’t Chase It – Graph 8
The direction in which a market is going and the speed at which it’s moving determine pricing strategies. Properties that are appropriately priced for the market will always make the best impression. They will be the first shown, the most talked about, the first to receive offers and the most likely to sell. However, if the price does not match the direction of the market then buyers will merely move on and never give the property a second thought. The best way to truly get a property sold in a shifting market is to outthink the other sellers you must compete against. You must price ahead of the market; otherwise, you will be chasing the market.
Sellers’ Market – Graph 9
When in a sellers’ market and property values are on the rise, sellers can price their property to sell at its maximum price now. This is choosing “at the market” pricing. If you want to sell quicker, then you can choose “behind the market” pricing by offering a price below the market. Pricing “behind the market” when prices are rising means you could be leaving money on the table for a quicker sale.
When a property is not priced ahead of the market it’s essentially behind the opportunity curve – the opportunity to get the best possible price. Successful pricing means getting the maximum price for a property in that market, and pricing strategies will differ based upon the direction of the market. It means getting the maximum price now for a property. Getting a maximum price now doesn’t necessarily mean getting the maximum price possible. What a property is worth is the answer to a value question, but what a house will sell for is the answer to a sales price question. When you go to price your property, two things matter: where is the market now and the direction it’s going.
Buyers’ Market – Graph 7
When in a buyers’ market and prices are falling, if you price behind the market your property won’t ever sell. You have to realize that you must stand out now and get sold or you will be chasing the market all the way to the bottom. Your only real choice, if you want to maximize your price and sell now, is to price “ahead of the market.” This means dropping your list price below the market. If you fall behind a market with falling home values, you can end up chasing the market down because home values are falling faster than your price reductions.
Stable Market – Graph 6
Whether the market is on the way up, on the way down or is stable, you should always price to the market you are headed to and be realistic when you receive an offer for your property. Here is an interesting way to look at things when you reject an offer. Rejecting an offer, is like you are “buying back” the property at that price with the expectation you can resell it and get what you want. This is why it’s so important to seriously consider any “reasonable” offer that comes your way.