Pricing a house is much like fishing – and the house is the bait. You not only need the right kind of bait (location, condition, size, etc.) for the fish (buyer) you are looking to catch, you also must place it in the right fishing hole (price point) in the pond or lake (market). If you price it too high, it’s like fishing 100 feet deep in a hole where the fish are swimming at 25 or 50 feet.
If you price it lower than market value, it’s like fishing at surface-level depth where the investors hang out and EVERYONE sees the bait. In order to find the fish that are biting (ready, willing, and able buyers) you need to be at the right depth (price).
Sometimes you have to put your line in the water and see if the fish are indeed biting, but you don’t want to stay there long if they aren’t. Price reductions should be done according to what the market suggests. If there aren’t any bites (showings or offers) then you need to adjust your bait (price or condition of the property).
We recently saw a house sell in a day, for what seemed like more than it should have, because it was priced enough below market value that EVERYONE wanted a chance at it. Due to the “auction-like” atmosphere, the winning buyer ended up paying a steeper price than if it had been priced higher to begin with.
It’s called group contagion! If everyone seems to want it, then the price gets driven up — you see it in auctions all the time (you also see it when kids feed the fish around marinas – all the fish are fighting for the food). Competition drives pricing up. Conversely, when you price too high and it sits on the market too long, people begin to say “If no one else seems to want it then I don’t want it either.”
Here are a few rules of thumb for pricing in today’s market
— Take a look at other recent comparable sales (size, location, condition) over the past year
— Consider current inventory and what is available in similar price ranges and locales
— Assess which direction the market is moving — buyer’s, seller’s, or balanced market?
— Evaluate current market trends and compare with your home (decor, style, amenities, etc.)
— Determine the time-frame in which you want to sell and price competitively – longer timeframe does not necessarily equal higher sale price.
— Monitor market activity weekly and adjust accordingly (your real estate agent should be doing this and providing you with timely information and recommendations)
Marketing a home is only effective if it is priced accurately. Just like fishing with the right bait, there is no amount of marketing and advertising that will make up for an overpriced property. Believe me, I have tried catching fish with grilled shrimp, bread, and other very creative bait substitutes — it just doesn’t work.
So think about fishing when deciding what the perfect asking price for your home should be. Remember, it’s all about the bait and choosing the right honey-hole.
Need some professional advice? Contact us at Buckelew Realty Group for an unbiased analysis of how much your home is worth in todays market.