In a buyer’s market you must price your home wisely if you want it to sell any time soon. One strategy, pricing your home well below its 2006 or at the top of the real estate bubble may not only produce a quick sale but could even encourage a bidding war and result in selling for more than listing price.
Strategic Pricing
Today’s buyers are looking for bargains so if you want them to look at your house, you need to price it right. You price the home below market with the expectation that this will not only encourage quick response but also encourage multiple offers. Of course, you must have enough equity to afford to lower your price and still make a profit. Some sellers who borrowed on their homes, in essence taking out the equity in the past can also consider this strategy.
What is Strategic Pricing?
It will depend on the market conditions in your area, but as a general rule, consider that for a home to sell quickly today, it will need to be priced 20% to 30% below it fair market value at the height of the market several years ago. Let’s say you bought the home in 2003 for $285,000 and watched it rise in value to about $500,000 in 2006. Today, if you want to sell the home quickly, you will need to price it at $350,000 to $400,000. If you sell at this price, you are still making a nice profit on the property but not as much as you would have if you had sold in 2006. A possible neighbor who bought the home next door for $500,000 may not be in a financial position to sell in today’s market or if he does, he will sell for a loss.
The Mindset of Buyers
As I said, today’s buyers are looking for bargains. So, if your house is priced right you will get a lot of buyers who want to come see it. The more people who see your house, the higher your chances are that you will get an offer. Also when your house is priced right, the odds increase that you will receive multiple offers. When a person makes an offer on a property or bids on an item in an auction, a certain level of mental ownership takes place. The person has made a commitment and does not like it if someone comes along and makes a higher offer. The person making the first offer is likely to be inclined to counter with an even higher offer. And so it goes.
Is This a Foolproof Strategy?
No, of course not. It is possible that you might list your property below market and still not get any offers. What does this mean? It could mean that your price is really not low enough. Maybe you and/or your agent misread the market. At this point, you can regroup, possibly change agents, and possibly lower the price even more. But with so many homes on the market that are not priced to sell, you can pretty much count on buyers to rush in and make offers on your home that is priced right.
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