The Price Sells the House
T
Top Producing Team
Gilroy Offi ce, 2015, 2016, 2017
Sean Dinsmore, Realtor
Intero Real Estate Services
www.TheDinsmoreTeam.com
408.710.2855
DRE #01966405
Marta Dinsmore, Realtor GRI
Intero Real Estate Services
www.TheDinsmoreTeam.com
408.710.0571
DRE #01352339
12
here is a general rule of thumb in the real estate business that wise
professionals keep on reminding themselves about when pricing a new
listing. It suggests that if a property is as little as 5% over what is perceived
to be the market value, the seller loses half of the potential buyers! Not a good
idea. Worse: if the property is listed at 10% over market value, 70% of the
would-be buyers are eliminated. This is especially true at the high-end of the
housing market.
Hence question #1 to the home seller: Do you want
to just list or do you want to sell? If listing is the deal, be
my guest, put any price you want on the contract. If, however,
the idea is to sell, then put a price on the house which is likely
to attract as many buyers as possible, as soon as possible, and
produce a sale at the best possible price.
Now, question #2, this one also for the seller: Do you want
to sell the house or do you want to hire an agent who “buys the
listing”? This is the term Realtors use when an agent, who is
being interviewed for the job of listing a house, knowingly tells
the homeowner a price that is higher than market value, and
consequently higher than the accurate price ethical Realtors
will provide. They do this so that they can get the listing contract signed, secretly
knowing they will have to go through a price drop at some point. Aside from a
host of ethical issues, I personally don’t understand why agents do this, unless the
agent is starving and will do anything to secure the business. In the end, both the
agent and the sellers are frustrated and disappointed, and nobody wins.
There are three pricing strategies: you can price at what you perceive to be
market value based on pertinent comps; you can underprice a bit or a lot in hope
of creating a bidding war (if and when the local market is ripe for this scenario); or
you can overprice and play Russian roulette (and perspire heavily for a long while).
Some homeowners make the calculation that, in order to eventually land at their
agent’s suggested price, they should add 10% or so and wait for the winning offer.
Sorry, it does not work that way! That much over can almost guaranty that the
house is going to collect dust, sitting in unsold inventory, for a long time. At least
until such time when the price is seriously reduced.
I don’t have to remind anyone that a price cut, no matter the extent and no
matter the moment, is an emotionally charged event. So much so that, when it
finally occurs, it is often too little too late. The principle of a price reduction is to
give new momentum to the marketing and resurrect Realtors’ as well as prospective
buyers’ interest in a property. We need to create or recreate drama. The timing and
the extent of the reduction are keys to the success of the operation.
Typically, in a hot market, a price cut might be pertinent after a week or two of
exposure and little if any action. In a relatively good market, a month is usually
enough time to test the market before adjusting the price. Now, the thing to keep
in mind is that a price cut must be substantial enough to restart the marketing
engine. We are not talking about a symbolic price drop here.
In the case where an agent and a seller disagree on market value, a calendar of
possible price reductions should always be part of the listing negotiation, so as to
avoid bad surprises. If the market is just lukewarm, merely following the trend
with a reduction every month or so is essentially useless, as other newly-listed
homes already integrate the new valuation and, on top of that, have the huge
marketing advantage of being fresh inventory. Any price reduction will have to
anticipate market moves and beat the most recent comps to stay ahead of the pack.
The moral of the story is that, even though everything about pricing is largely
hypothetical, experience often teaches that the more conservative and reasonable
the initial list price, the better the end result.
GILROY • MORGAN HILL • SAN MARTIN
OCTOBER/NOVEMBER 2018
gmhtoday.com