BEWARE — Here’s What Happens When You Overprice Your Home
Barring special circumstances, there is generally nothing more important to sellers than the net amount of funds they retain when their home is sold. As every real estate professional will attest, pricing correctly for the market at the outset of the listing period is far and away the most important factor in the sales process — as they say, “price conquers all buyer objections.”
Each year in the real estate industry, numerous books are written, classes are taught, and sermons are delivered on the topic of pricing. Nonetheless, every day homes come on the market that are overpriced based on recent market data.
The image below is a snapshot of just how big a hit sellers take when they price incorrectly in the Mill Valley, California real estate market for homes between $1 million and $2 million (based on sales from January 1, 2009 to October 7, 2009).
Note: if a home sells within the first 30-days, those sellers received an average of ~97% of list price. I think all would agree that is a great result! At the other end of the spectrum, homes sitting on the market for over 120-days, sold for 82% of list price. Those are startling figures.
Let’s do a touchstone example with easy math — we have a house that should sell for about $1 million, based on recent comparable sales.
- Option 1: The sellers go with my suggested list price of $1 million — because it is priced approprately, it sells after the 1st open house for $997,000 (e.g., 97%).
- Option 2: The sellers decide to list it at $1.1 million (to test the market and/or to allow “wiggle room” in negotiations) and it takes 5 months to sell — eventually, it sells for $902,000 (e.g., 82% of list price).
The takeaway: By pricing correctly at outset, not only do the sellers net $95,000 more for the sale of their home, but they also avoid the massive inconvenience of prolonged marketing (open houses, showings, and general anxiety — and you can’t put a price on that).
If you would like to discuss pricing issues in relation to your upcoming home sale, please call me at (415) 350-9440 — Kyle Frazier, J.D., Broker Associate, Realtor, Certified Residential Specialist with Pacific Union International, Kentfield (Marin County, CA).