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House Pricing Overview
That home that’s been sitting on the market for too long can be from a number of factors, but ultimately the right house pricing strategy will help homes avoid sitting idle after listing.
You heard that correctly, the pricing of a home is often a deployed house pricing strategy rather than representative of the direct value of the home.
Ultimately, the market determines what buyers are willing to pay, but the goal of this discussion will be to break down a number of pricing strategies to deploy to get your home off of the market faster.
House Pricing Strategies
There are 5 key house pricing strategies we’re going to discussing including:
- Comparable sales pricing
- Above competition pricing
- Below competition pricing
- Online pricing
- Seasonal pricing
Allison Edwards represents sellers for The Kree Team, and says “Pricing a property correctly is pivotal in determining the amount of interest you will get. The more eyes you have on the property, the better chances you have of moving it quickly, which provides an opportunity to save the seller money by reducing their holding costs. The price and terms are also more likely to be skewed in the seller’s interest.”
Keep in mind that while there’s no ‘one size fits all’ strategy, it’s critical to work with your real estate team to determine the best strategy for you given the time, location, and market conditions.
Comparable Sales
Data
The comparable sales (Comps) house pricing strategy is one of the most popular, and for good reason. Comparative market analysis (CMA) allows you to put your home against other recently sold properties that are similar in:
- Location
- Size
- Condition
This gives the seller data to back up their list pricing and the ability to show buyers directly why their home is priced where it is.
Emotion
This can also take the emotion out of pricing. Oftentimes, a seller has an emotional connection to the home and tends to value it (rightfully so!) more than a prospective buyer will. By removing emotion, you’re able to realistically price the home and ideally move it faster.
We know this is easier said than done, so here are 10 tips from OpenDoor on removing emotion from the equation.
The final piece of the comparable sales house pricing strategy is that it can also help you determine if it’s worth making upgrades to the home prior to listing. For example, if running a CMA brings you to the conclusion that the best selling homes had a newly upgraded kitchen, it might make sense to make some renovations on yours before listing.
Above Competition
Setting your list price above the competition might seem like an obvious first thought when the time comes to list your home. After all, every seller thinks they can get more than the competition, right?
You’ve taken better care of your house and that house down the street doesn’t even have a backyard fence like your home.
If you’re going to list your home at a higher price, here are a few things to consider.
Set a timeframe
By setting a timeframe on how long you’ll stick to your guns with that higher price, you’ll give yourself a shot at hitting that homerun OR still have the agility to lower the price so the home isn’t on the market for too long.
Ultimately, the longer a home sits on the market, the more leverage the home buyer has.
Show your value
Home buyers have done their research and have a buyers agent working on their behalf to ensure that they’re working toward their goals. Have objective reasons as to why your home is listed higher.
Below Competition
Below competition house pricing sounds crazy at first right? Especially when the goal for a seller is typically to get as much money as they can for the home.
Here’s why it might make sense.
Bidding War
The below competition method can be very effective as it seeks to attract a number of interested buyers and ultimately start a bidding war.
When implemented correctly, this bidding war can lead to much higher prices than a competitive market analysis would justify!
There is however a time and place for this house pricing strategy. During a buyers market where there are more homes on the market than demand for homes, this strategy can work well.
Multiple offer situations that lead to a bidding war are ideal for the seller, but there’s another area where this strategy plays out.
Allison mentions “Given how the D.C. market has been operating over the past few years, there is a lot of expectation that every property will result in a ‘bidding war’. While there are certainly properties that command that level of attention, even in slower times, it’s not a universal phenomenon. Different segments of the market behave differently, so if you are selling a condo in one neighborhood, but buying a row-home in another, you might not experience the same pacing on both sides. While most sellers are understanding of this, it’s definitely something that needs to be discussed thoroughly to ensure the proper expectations are set. We want our sellers to feel great about the result, and that can’t happen if they are comparing apples to oranges in their heads.”
This highlights the criticality of working with a team of experts to get it right.
Home conditions
If you see that your home is a bit older and could use some renovations that you’re not interested in tackling before listing the home, then pricing below competition can be effective.
Be sure to work with your seller’s agent to ensure that the numbers make sense before deploying this strategy based on home conditions.
Online Pricing
Value Your Home
With this strategy, it’s important to first value your home. Once you figure out your home’s approximate value, making minor adjustments can help increase your visibility on popular home search websites.
Setting Search Criteria
Zillow, Redfin, and other competitors allow you to narrow down your criteria with filters such as how much you’re willing to spend on the home.
As an example, if your home is listed for $510,000, those that set their search filter to $500,000 as their max will never see your home in search results. In this example, the sacrifice of $10,000 to list the home at $500,000 may be worth it in order to have your home seen more (you may ultimately still get your number!)
Allison from The Kree Team recapped a recent example and stated “I recently worked with some sellers that were aiming for a final sales price slightly above what I would consider to be a fairly significant ‘threshold’, meaning pricing above it would leave out a good number of potentially interested parties. After working through some of their concerns, we agreed to price it below that threshold to attract the most interest. They were thrilled to receive 14 offers after just one weekend on the market, and ended up at an even higher number than they had originally been hoping for. Had we not taken that approach, it’s unlikely the property would have received as much attention and escalated to the point that it did.”
Seasonal/Market Shifts
Now this is a tricky one and only recommended if you’re dealing with a seller’s agent that has a significant amount of experience in a specific market.
For example, you may potentially see a spike in buyer demand during the spring/summer months as parents look to settle into new homes before the school year kicks off.
Another example is for those that live in an area where retirees tend to relocate. You may see a spike during the fall as new retirees look to get settled in before the winter hits.
Keep in mind that these are broad examples and are very specific to the market you’re in, so it’s best to consult with an agent before making these decisions.
Closing out House Pricing
After this discussion, you’ll note that the price of your home may be more than just the direct value of the house, but rather a marketing strategy deployed to get the home sold.
It’s critical to understand how your home compares to competition with objective reasoning behind how your home is priced. One of the most common challenges is removing the emotion from the memories, but we’re here to help!
Book your consultation today and speak to one of our expert seller agents to learn more.
