Monica (my Associate) and I recently had a follow-up meeting with a prospective listing client to discuss pricing strategy. In the meeting, the (now) client wanted us to list the home at a price that was almost 20% above what we believed the home would likely sell for. Although he pretty much agreed with our value estimate, his thinking was that the higher we price the home, the more room there would be for negotiation and the higher the ultimate selling price would be. This old school wisdom still has its place in real estate; however, the way in which agents and buyers search for homes in the electronic marketplace must also be considered.
The real estate market is characterized by electronic matching of buyer criteria with property attributes. Anyone (which is everyone) who has searched for homes online knows that price range is a criterion used in most home searches. A home that is substantially over-priced will not pull up in a price-range search along-side properties with which it could otherwise compete. The home will, however, pull up among higher value homes with which it can’t compete (and buyers will simply disregard it). It is, therefore, not a matter of whether or not buyers think your home is over-priced; it’s a matter of whether qualified buyers find your home in the first place.
Think of an over-priced home as being a bit like underwear in the jeans drawer. If you look in the underwear drawer, you won’t find the undies. If you are looking for jeans, you will see the underwear and wonder why it’s in the jeans drawer. Similarly, for qualified buyers to find your home, it needs to be in the right price drawer.
The best real estate agents understand how to price a home in the electronic marketplace to maximize relevant exposure and achieve the highest price for their seller clients.