How Do You Price A Home For Sale?

How Do You Price A Home For Sale? Why does it seem that almost all real estate starts out at an unrealistic price point to some degree? Whether it is a little over priced like 2% or 3%, or a lot overpriced by 10% or 20%, doesn’t it seem like the price always starts high? There are some homes that get bid up from the asking price. But that seems to be the exception to the rule. Is this simply a human nature problem? When you own something and you go to sell it you always hold it more dear than others? Or is it that a buyer is always looking for discount? Some people point the finger at the real estate industry and say that Realtors almost always overprice listings to convince the buyer to go with them to list the property. This is called “buying the listing.” Do realtors not convey the market will only bear whatever it will bear.

It may be a question that never gets answered. It would be nice to have some insight into the topic. Sellers should have a better grasp of how to price their property for sale.

Pricing a house is just a marketing ploy?

Some people say that the price of a house is solely a marketing tool, and that a house is worth what it is worth. They say what you ask for a home does not have anything to do with what it will sell for. In that case, to attract more people to your property, this logic says you should always under price property and it will stand out. And then it will get bid up to its natural price point with more attention.

It’s a free market?

If you believe in a free market then maybe this is true. Maybe an asking price is irrelevant to what a house will sell for. eBay may be an interesting analogy. On eBay there are usually other items for sale that you can compare the one you want to buy. And ultimately the item sells for whatever it sells for, after being posted, and reposted, and possibly reposted again. Assume you have a crystal bowl on eBay for $34 dollars knowing that you think its worth $100. Will it get bid up closer to $100 by default? Or because you priced it so low to start will it only draw low bids?

How Realtors get paid

I have one client who had an opinion about how sellers and Realtors price property for sale. They said, “My solution to brokers who give you the highest selling price only to win the listing, is to make their commission contingent on the final selling price and use a sliding scale down based on what the buyer nets from the sale of the transaction. This is a great way to tell if they really think you can get the price they want to put the house on the market for.” Interesting thought!

I talked a little bit about how Realtors get paid, here. Feel free to weigh in with ideas of your own.

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