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Pricing Tactics…Or the Art of Juggling with a Grenade (Shorelines – Spring 2012)

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One of the oldest and still challenging questions is “What price should we put on the listing to produce the best price in the end?”  The choices have always been and will always be the same: Overprice, Underprice or Price at what is perceived to be “market value”.  The problem with this question is there is no magic recipe that works every time.  It depends on the market, it depends on the property and it depends on the marketing.  Let’s look at the three options and briefly analyze the pros and cons of each one.

1.  Overpricing:  Hard to define what is an overpriced listing.  As far as I am concerned, and overpriced listing is one that does not sell!  In other words, a property is not “overpriced” if a buyer buys it, even if we thought it was we we put the For Sale sign up.  The supply & demand dance can do strange things in a good or difficult market.  In the real estate business, the past is not necessarily a good guide to predict the future.  What we can say, looking backwards, is that if a residence has been on the market more than 6 weeks and did not sell yet, chances are it is indeed overpriced.  Overpricing, in any market, is a dangerous idea.

2.  Underpricing:  Talk about dangerous games!… You must have a strong heart to deal with this option.  It can work to the sellers’ benefit, occasionally.  It can  hurt just as well.  The idea is to tease anxious buyers with a price 5% – 10% lower than what we percieve to be the market price and manufacture a bidding war which will result in multiple offers and ultimately a sales price well over the asking and over what we thought the house would normally sell for.  Keep in mind that under pricing does not guarantee you a higher price.  It could go the other way.

3.  Pricing at “market”:  If you as a home seller, think you know at what price a buyer and seller are likely to come to terms, in any market, because you have a bunch of reliable comps (recent local sales of similar properties, active listings, etc), I suggest you use that option rather than playing with a grenade.  You may put a tiny cushion on top of the price to allow for possible negotiation.  If the price is too high, you will soon know and you will trim the excess fat right away.  If the price is too low, you may benefit from an unintended buyers’ frenzy.  If the price is right, you will likely obtain a quick & easy sale.  A win-win.