A quite common and overwhelming concern that arises when listing a property is the price point. List price is one of the most important aspects in selling a home and if priced incorrectly it can be detrimental to the sale of your home. Upon the completion of the Comparative Market Analysis presentation and the agent having shown all the market research on how they derived a listing price point for the home, many sellers will get other opinions from other agents (which makes complete sense) to see if that price is the most accurate price for their home in addition to also evaluate if the agent provides the best marketing options and services to insure they are the right agent for them. In reality, one of the most intricate and key responsibilities of an agent is to not only market your home at the highest level possible but to also research the market through in-depth metrics and calculations, not to create the price of your home. The price of your home is created from the market, not from the agent sayings it’s with “X” – remember they are not the ones buying your home. Now when I say the market, I am saying the what a willing and able buyer is willing to pay to a willing and able seller of a home. This is a very important aspect to understand when evaluating the knowledge and expertise of the agent. Keeping all other measures of whether to hire a certain agent aside, just because one agent came in at a price lower than another agent doesn’t make them a worse agent; in reality that agent that came in at a lower price may be your best choice and most knowledge agent in that market.
Now the reason I say this is because as a seller you are much better off underpricing your home as opposed to overpricing your home. In the event of overpricing your home this is what happens: there are many buyers looking at the specific market you are in and see your home come on the market; they love the neighborhood, and quite honestly, they love you home EXECEPT for the fact that it is $50,000 over their price point when the home is worth $350,000. So what do these buyers do, they don’t think to put an offer in $50,000 under asking because they don’t want to insult the seller (even though you may have been willing to take that price and you overpriced it thinking someone would just offer lower if they really wanted to), they move on to the next home that comes to the market that IS IN their price point and they have now moved on from you home. Months later your home is still on the market and even after multiple price drops its now old news. You will probably end up getting less money for your property because you over priced it than had you more accurately and reasonably priced it.
In the case of underpricing you home it can actually create value in itself. So your home is slightly underpriced (say by $10,000 when it is worth $350,000) and the buyers on the home search hunt see it hit the market, they love the neighborhood, they love the home, and OH by the way, it’s UNDER their budget. What do they do? They fall in love. And so do three other buyers. They are now at a point of irrational thinking and want to compete with these other buyers, a bidding war has now been created and your home sells for $30,000 above asking. The key take-a-way: don’t get caught up when multiple agents give you price points they think your home should be sold for – don’t necessarily get excited when there are 3 agents saying list your home for $350,000 and 1 agent says $400,000 so you go with the $400,000. It would be in your best interest to go for the lower price point and have you home turn into a bidding war. The market creates the price and if one buyer sees you home at a reasonable price, many other will too. You have now created value through the bidding war process… something that many overlook. Keep this in mind the next time you sell your home. It is also important to remember that the price point an agent gives you to list you home is not the only way you should be measuring whether to hire an agent; many different aspects should be taken into consideration including their knowledge of the market, fees, network, professionalism, availability, and accessibility in addition to their marketing power they are going to provide for you.
Per usual, feel free to contact me for any needs related to real estate; I have many contacts in the field and am happy to help in any way I can. Next time you’re thinking of buying/selling/renting commercial or residential property just reach out!
Enjoy the fall weather and Sunday’s full of football!
Jacob C. Ashley
Ready Real Estate
8 Chelmsford Street
Chelmsford, MA 01824
Cell: (978) 265-8238