By Al Filippone
Our last blog post included some of the reasons that home sellers do themselves a disservice by pricing their home too high from the onset. Today we answer a question that is asked by many who are puzzled by the fact that their home hasn’t received even a “low ball” offer. “Why hasn’t someone at least made an offer?” the listing agent will often hear from a frustrated seller.
The graphic below, from David Knox, will be our focal point for the purpose of helping sellers understand the answer to this question.
The National Association of Realtors has determined that most buyers will eventually spend in the area of 5 percent more than what they initiallly plan on spending. They begin by looking in a certain price range, don’t find what they want and then bump their price upwards. (The same is true when purchasing a car, clothing and I suppose that’s not all.)
The consequence of pricing a home too far above market value is illustrated above. The buyer who views this home will be comparing it to homes of greater value. Those who will eventually spend 5 percent more than where they are looking, even if they don’t know it yet, will typically not see a home that is priced dramatically higher than the buyer’s initial price range. At times even if it’s simply 15 percent or more.
Thus, when a seller complains that, “The wrong buyers are seeing my home!”, they’re right. Not, however, the wrong profile of buyer which is what they think. In actuality, it’s the wrong buyer in the sense that the home needs to be viewed by someone who will meet the homeowner’s price. That’s the benefit of pricing a home right at or just slightly above what appears to be market value based on all the data—to capture that buyer who will eventually spend 5% more.
In addition to attracting the wrong buyers, the wrong price has other drawbacks:
- The home will likely not appear on the buyers radar if it’s much higher than the 5% differential.
- The home may serve as a catalyst to sell other homes that offer more value.
Later in the week I will explain the final of three valuable graphics on pricing one’s home properly.
Property transfers columns in area Patch communities:
Darien | Fairfield | Greenwich | (Greenwich open houses) | New Canaan | Norwalk | Stamford | Westport | Weston-Redding-Easton | Wilton
The Darien Real Estate topics page, which includes:
- Youtube Open House (videos for homes on the market)
- Elaine Falkenberg's real estate blog (including open houses)
- Ken Allen's real estate blog