In listing presentations sent to prospective sellers, I include a selling range of what I believe their home can sell for based on the current market. I include a comparative market analysis with similar nearby homes that have sold recently and prices for homes that are currently on the market (the competition). When providing the selling range, I draw upon my experience in portfolio management and my ability to see trends and deduce market information such as the comparative analysis and other data points like days on market at various price points, average difference between list and sale prices, location, and property condition.
Experienced Realtors will tell you that pricing a home appropriately from the beginning is critical to getting it sold quickly and at the best price.
Unfortunately, some prospective sellers don’t agree with my selling range and believe that their homes should be worth more. Often they cite the reason being that they’ve done a bunch of work to the house, there is sentimental value that hasn’t been captured or that they heard a neighbor sold their house at a specific amount and that their house is a lot better or bigger. Many homeowners want to set their list price based on what they paid for their home, the balance of their mortgage, or on the profit they want to make.
My response is typically, “Your home is only worth what someone is willing to pay for it,” followed with “nevertheless you are the owner and we can list the home at whatever amount you would like and see how the market will react”.
The caveat “…see how the market will react” is important. If your home is priced too high, some potential buyers won’t want to look at it at all, while others will simply walk away without making an offer. With today’s market, if we are not seeing any interest right away especially after implementing my proven broad marketing strategy, then we need to reconsider the list price right away. Research has shown that the longer your home sits on the market or “languish”, the harder it will be to get a good deal. Prospective buyers will often look at days on market as an indicator on the possibility of getting a deep discount and may think the sellers are “highly motivated” to sell.
Often times, prospective sellers are considering several Realtors and asking for a few different quotes on the list price of their home. The temptation is to take the highest quote, but this can be misleading. If you get three different Realtors to evaluate your house, and two of them are about the same but lower than you thought and the third is high and fits about or above what you think it should sell for, that Realtor may be trying to “buy a listing”. The Realtor making that higher quote does not intend to list your home at that price but rather get your listing and then talk you down while your home sits.
Sellers should be aware of that and ask to see each of the Realtors’ data that they used to back up their estimation.
The initial activity of a home priced right should gain momentum right away. If your home is over price, then it may sit and take longer to sell. Even if you do find a buyer willing to pay the higher price, the house still will need to be appraised by the mortgage lender, which could then show that the current market won’t support the price and the deal could fall apart. All while your house being off the market through the time it’s under contract.
In today’s market, a house should not be on the market for 90+ days if the house is in showing condition, broadly marketed, and priced right.