Importance of Listing Prices on Sellers’ Net (Mill Valley Example)

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. Managers implore their agents to advise their clients about the dangers of over-pricing and agents natter on amongst themselves about the importance of this element of the home sales process.

Nonetheless, homes come on the market that are overpriced based on recent market data. And this injures not just the sellers, who end up netting less on the sale of their home, but it collaterally hurts the listing agent’s reputation, the neighborhood’s reputation, and the morale of buyers and sellers (who are understandably frustrated by incorrect pricing, although for different reasons). 

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).

For example, 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 I estimate should sell for about $1 million. 

• 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). 

By: Kyle Frazier, CRS (Christie’s Great Estates | Morgan Lane Marin Real Estate). Kyle is a Certified Luxury Home Marketing Specialist and is available for counselling and selling services in Marin County, California.