Pricing Mistakes
Home Sellers: How to Avoid Pricing Mistakes
Accurate pricing is crucial to getting the most money possible when you sell. If you under-price you can actually “leave money on the table.” Yet studies show sellers lose more money by over-pricing than underpricing. To see why let’s look at: The Law of Diminishing Value; Common Pricing Mistakes; and the Accuprice® system.
The Law of Diminishing (Perceived) Value. The longer it takes you to sell, the more buyers begin to ask: “What’s wrong with this house?” Or, “Why hasn’t anyone else bought it?” Almost without fail any home’s perceived value to buyers continues to go down the longer it takes to sell. This is the law of diminishing value.
Ownership Bias Leads to Common Pricing Mistakes. Studies show that when we want to sell any of our possessions – whether a car, rare Beatles, or a house – we tend to place a higher value on our possessions than would-be buyers do. Psychologists call this Ownership Bias, and makes home sellers easy prey to a variety of pricing mistakes.
The “I Want or Need $$ Amount” Mistake. Whether you will use your home’s proceeds to buy another home, fund retirement, etc., it can be tempting to think in terms of how much money you want or need for that downstream purpose. I hate to tell you, but buyers don’t care about your downstream plans.
Highest “Bid” From Competing Agents. How many agents “should” you meet with? A comprehensive national study proves that most home sellers -72%- interview only one agent. Yet, the ‘anonymous advice’ that you should meet with at least three agents remains persistent in some circles, and if you do this you’ll probably encounter a practice called “buying the listing.”
Agents understand ownership bias and some are masters at using it against you. If your home is worth $500,000, agents know you’ll want to hear that it’s worth $550,000. When agents know you’re interviewing multiple agents, they will be tempted to”out-bid” one another, promising to sell at inflated prices, knowing that many sellers choose whichever agent promises the highest price. Then, the inflated price causes your home to sit unsold for months and you fall victim to the law of diminishing value. You ultimately sell for far less than you would have if you’d price it right to begin with.
Price Right from the Start with AccuPrice®. At the John & Angela team we use AccuPrice®, a pricing tool so accurate and unique it is registered with the U.S. Department of Patents and Trademarks. AccuPrice® considers your home’s three key factors: (1) location; (2) features/amenities; and (3) overall condition; and then compares them to those of the competition – including homes recently sold, those currently under contract, and properties actively for sale at the moment.
Now all experienced agents will do something like the above analysis, but what makes our AccuPrice® system unique is that it also takes into account current market momentum (whether prices are generally rising, falling or stable) and seasonality factors. The AccuPrice® analysis makes it easy to remove emotion from the process, and is available exclusively through the John & Angela team.
The Ultimate Test (And Adjusting Quickly) Any pricing tool – even AccuPrice® – is a calculated estimate of the value buyers will attach to your home. The ultimate “test” of your home’s value, then, comes only from the marketplace. When the market agrees with your price you’ll get a strong offer to buy quickly (sometimes multiple offers). According to the National Association of REALTORS®, if you have no offers to buy after 8 – 10 showings, it’s a sign that price and/or condition are off and time to consider adjusting one or both. So it’s crucial to pay attention to “feedback” from the market, and if adjustments are suggested, you want to make those adjustments quickly while your home is still “fresh” to the market.
To get a free AccuPrice® valuation of your home, and/or for any other real estate questions Call 410-935-0386, or email [email protected]. Thanks!