Common Pricing Strategies
1. Clearly Overpriced
Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win a listing is to overinflate the value of your home, This is done far too often, with many homes that are priced 10 to 20% over their true market value. This is not in your best interest, because in most cases the market won’t be fooler. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks: -your home is likely to be labeled as a “troubled” house by other agents, leading to a lower than fair market price when an offer is finally made. -you have been greatly inconvenienced with having to constantly have your home in “showing” condition. These homes often expire off the market, forcing you to go through the listing process all over again.
2. Somewhat Overpriced
About 3/4 of the homes one the market are 5 to 10% overpriced. These home will also sit on the market longer than you want. There is usually one or two factors at play here: either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there is a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you more in terms of time on the market.
3. Priced Correctly at Market Value
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of the other homes on the market. These competitively priced homes usually sell within a reasonable time-frame and very close to the asking price.
4. Priced Below the Fair Market Value
Some sellers are motivated by a quick sale. Buyers view the reason for this is usually that the condition of the home is sub-par or the seller is motivated to sell quickly. Depending on the market conditions, this sometimes attracts bidding on the home, or the strategy may backfire altogether with low-ball offers to entice a highly motivated seller to accept a lower price. Be cautious and know what the implications are when you decide on the strategy.