Pricing Your Home for Sale
Pricing your home for sale is a practice in optimizing your return on investment while simultaneously meeting the market at value. It is always important that a Seller receives the highest and best price for their home. However, the market doesn’t respond to the price that a Seller wants for their home. The Buyers respond when they see market value.
A few things you should know about pricing your home for sale:
Asking Price vs. Selling Price
So what is market value, you ask? Market value is best thought of as a bell curve. On the far low end is the price most desired by Buyers. On the far high end is the price most desired by Sellers. The area in the middle that takes up the majority of the bell curve is what as known as the common price range, or market value.
Critical Weeks (or Days!) When Listed
The National Association of REALTORS says that a balanced market has between 5-7 months of inventory. This is calculated using the absorption rate, which is the rate at which homes are selling in a specific area.
Homes for sale in Boulder County as of 2015 have an absorption rate that has been hovering around approximately one month of inventory. The graphic to the right is a national average saying within weeks 3-5 your home is getting the most attention online. That is true when the balance between Buyer and Seller is equal, and it takes about 5-7 months to sell a home.
However, in our area, in this current environment where the balance is significantly in favor of the Seller, the chart to the right should reflect DAYS on market. That means that when pricing a home for sale in Boulder County your first 3-5 days on the market are critical when presenting your home for sale.
The old saying that your first impression is your best impression is absolutely true! Having a strong marketing plan for selling your home as well as properly staging your home is critical for maximizing the potential price of your home in the marketplace. However, you can stage your home professionally and take the prettiest pictures and it won’t make a difference if the price of the home is to high. The best marketing combine with the right price will get your home sold quickly, and in this market that is the best thing that could happen.
Pricing vs Potential Buyers
Pricing your home for sale at market value at the moment it hits the market will ensure that the best potential buyers are viewing the home. Using the graph below you can see that the optimal price will reach the majority of the viewers where about 60% of the market is qualified and ready to consider your home for purchase. Go higher than market value and the amount of Buyers who are qualified to buy your home and who also see the value decreases significantly! The other drawback of pricing your home to high is that your property climbs into the next highest price bracket so that it will be competing with high-end homes than it would have if priced right at market value.
Importance of Pricing
When pricing your home for sale in Boulder County if you come to the market at a price higher than the perceived value from the Buyers, they will not bight.
The Buyers may come to see the home because it is new and fresh, but if they don’t buy within the first 5-10 days, you can be assured that the price is too high.
You can make one or two price adjustments before the market becomes suspicious of why your home isn’t selling. If a price adjustment is necessary there is a rule of thumb that I use.
For homes that are between $300,000-$400,000 the price adjustment should be about $10,000 in order to jump into the next pricing bracket and search criteria for new Buyers.
If the home is $500,000-$600,000 the price adjustment should be about $20,000.
For homes above $600,000 the price adjustment should climb by about $10,000 for each $100,000. So for a home that is priced at $1,500,000 the price adjustment should be around $100,000 when adjusting down to meet a new market segment.
If the adjustment is less than that there is a risk that you won’t climb into the next searching criteria and the same Buyer’s who thought you were overpriced before will be considering the same commentary after the adjustment. Make a significant price adjustment and the new set of Buyers who didn’t see you before will be evaluating your listing, along with the previous Buyers who already stopped by.
This broadens the market and maximizes the potential of selling before the suspicion sets in. The listing might become suspicious to Buyers when it has been on the market too long or had too many price adjustments.
The Buyers will begin to wonder what is wrong with the home and why it hasn’t sold. This is especially true when the market is so hot and things are selling so fast. If you have been active for sale for over 30 days people really begin to ask themselves why everyone else hasn’t bought and what the problem could be.
The slippery slope of this situation is that the home will actually sell below market value. That is because the listing started off so high and the suspicion grew so that Buyers avoid the home until it truly is priced at a value below the market rate.
