It’s no secret that buyers search online for homes, but where they used to search slightly higher than they could afford with the intention of negotiating lower, they now search lower to negotiate up.
By Real Estate Coach and Speaker Darryl Davis, CSP
Pricing a home is never easy, no matter how long you have been in the real estate industry. For one, it’s not our job to determine the value of the property like an appraiser, it’s our job to coach the sellers in choosing what to list the property where it will sell. It’s still a hot seller’s market, and while some areas are hotter than others, how do you handle being wrong?
In the first century, a man named Publilius Syrus said, “Everything is worth what it’s purchaser will pay for it.” The same seems to go for houses in the twenty-first century also.
Let’s say I’m auctioning off a piece of artwork, and the opening price is $500. If one person bids $500, and he’s the only one, apparently that artwork is only worth $500. Now, if I take another piece of artwork, and opening price was $500, and suddenly people are bidding like crazy, $550, $600, $750, then obviously that piece is worth more than the $500 it opened at.
So, when it comes to houses, when you price something aggressively, if it sells at that price, then it was never worth the higher number that you were hoping for. The only exception to this is if the homeowner isn’t in a hurry, and they want the property value to catch up. The market is appreciating, so you can ask for the higher number and the market will catch up to that price eventually.
Another Thing to Consider When Pricing Real Estate Properties
Buyers are getting smarter, especially when it comes to this market. Now, when buyers look online for homes, they aren’t looking at prices with the notion of bidding lower. They look at that listing price with the full knowledge that they will be paying more. The listing price is just the starting price. They will look at a property listed at $500,000, and know that it’s going to sell for more, like $550,000 or $575,000.
There are no more “asking prices”, only “starting prices”.
TIP: Read this related MillionAcres’ article, “How Much Over Asking Price Should I Offer On A Home In 2021?”
When buyers are saying, “If that’s the starting price, then I have to look at cheaper homes so that the amount I end up paying is this.”
When pricing a listing, you need to be careful that you don’t price too high, because you end up losing those buyers and pricing yourself out of the market that you were hoping to attract.
It used to be that buyer’s agents would look approximately $25,000 above the buyer’s limit, believing they could negotiate down, but now they are looking $25,000 under what the buyer can afford because they already know they will have to negotiate up to get the property.
TIP: For more tips on pricing a property, read our article “The Price Discussion: How To Talk Sense (and Cents) With Your Client.”
Needless to say, pricing a home today has to be a fine balance between pricing what the seller wants (and what you hope to get) and alienating buyers who won’t bother coming to see the home out of the belief they can’t afford it.
Are you ready to start taking things to the Next Level®? It’s time to find a comfortable balance between “staying in your lane” and “off-roading” when it comes to pre-qualifying clients and showing homes.
Power Agents®, you can check out the Servicing Sellers tab in the Classroom for more information on how to serve the needs of sellers, complete with information about pricing right the first time. Whether you need a boost of confidence or empowering strategies, we have it in spades!
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