Steve Koerber's Old Blog

Remuera's house sold name since 1998 – 021864166

Pricing a home to sell

Posted by Steve Koerber on December 19, 2007

I advised one of my sellers that if they really wanted their home sold they would need to revise their asking price downwards.  The actual price had only been set a week earlier, but because other sellers were reducing their prices, I felt my owner risked being ‘left on the shelf’. 

Markets either rise, stay steady or fall.  In a rising market, prices sometimes need to be adjusted upwards to avoid under selling.  A good time to be selling!  In a steady market, correct pricing is relatively easy.  In a falling market competing sellers use price reductions to effectively drag buyers away from your house.  A bad time to be selling!

My seller said she wanted to leave the price as it was.  She argued that if a buyer wanted to buy her house they would ‘make an offer’.  Although this strategy will sometimes hold true, it can also doom a property to many more months on the market and eventually a much lower sale price.  Slower markets make buyers more cautious and they will often only spend their money when they know a home is well priced.  Many buyers’ greatest fear is telling their property-wise friends what they paid, then being humiliated by the response “you paid that much”!  Here’s how it works:

The market was [at best] steady and more likely falling.  The average time to sell a house was increasing.  The asking price was $1.3million.  My suggestion was a bold reduction to $1.2million.  I was suggesting a likely sale price just under $1.2million.  This was based on feedback and facts.  I sensed that she would accept a figure around $1.2million but wanted to maintain her strong negotiating position.  She knew best and the agent just wanted his commission – true but not entirely!

Buyers typically compare asking and sale prices of comparable properties before they offer.  My argument was that if the majority of buyers see value  just under $1.2million, they are likely to make their first offer around $1,150,000.  The problem is that most buyers will put it in the ‘too hard basket’, even if they love the house, believing that they will fail or even worse, offend the seller by making an offer they feel is reasonable.  Whether perceived or real, a $150,000 gap is quite a big one.

In this scenario, the cry from the seller several weeks down the track is likely to be: “but I haven’t even had an offer, nobody has shown interest, so there is no evidence to suggest I need to drop my price”.

The cold hard answer to that is:  “Mrs Seller, you seem to want to keep your house and you’re not quite ready to accept the market”.  Don’t get me wrong, the seller is in control and is quite entitled to hold out for a better sale price.  Not reading the market however is fraught with danger if you actually need or want a sale.  If the market continues to fall there is a strong possibility that the home in the above scenario will never sell, or will sell for much less than it would have if the price had been reduced earlier.  

In a slower market, correct pricing is crucial – get it right and you’ll be on your way. 

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