Pricing Strategies: 3 Main Ways to Start the Pricing Decision
My recent article for the Washington Blade dovetails my recent YouTube Thursday Thoughts Episode on pricing strategies for selling your home. Read the entire article below or at the Washington Blade's website.
Pricing your home correctly from the start is imperative to a successful sale. We all love our home and frankly probably think it is worth more than it is. But that thinking can be a killer when it comes to pricing your home when you go to sell.
The first thing to remember when pricing your home is you must think of it like a product. While it is still currently your home, in the minds of the buyers it is a product. And buyers will decide if that price you’ve set is worth what the home offers. If it isn’t, your showings will lag and offers will just not arrive. This will lead to longer Days on Market which can be a huge turn off to buyers, especially in the DC market.
So, what is the best way to price your house to sell? It comes down to your specific home. What it offers, where it is located, the size, the condition, etc. It’s also helpful to see what the market norms are in pricing, so you are competitive. So before pricing any home, you have to do your research. You want to closely examine what similar homes have sold for in your area in the past year to 6 months. Seeing that data is a start to any good pricing discussion.
While there are many ways to price a home, and no overarching rule that applies to every home, here are three main strategies to think about when approaching finding the right price: Aspirational, Market Value, and Below Market Value.
Aspirational pricing is the “pie in the sky” way of pricing. When pricing this way, you review the comparable sales and price higher than what similar homes have sold for recently. It is easy to fall into the thinking that your home is worth more. Aspirational pricing is a more emotional way of pricing and even in a seller’s market it is likely not the right answer. Buyers will know if you’ve over-priced the home and will either not visit, not make an offer, or offer you a much lower price which is a hard pill to swallow.
Market Value pricing is pricing right in line with the comparable sold properties in your area. Adjustments to the price should be made to account for variations in the comparable homes. If one has a new kitchen, for example, it would command a higher price than a home that needs a total kitchen renovation if all other factors are very similar. Market pricing is a direct result of what the research is saying your home should be priced at and sell for.
Lastly, Below Market Pricing is when you analyze the comparable sales and price the home significantly lower than the Market Value indicates. If done correctly, this pricing model is putting the home at a lower price than where you expect the home to sell. If there is a lot of competition in your market, if you need to sell quickly, or if your home needs some upgrades this pricing model is worth considering. In certain markets pricing your home this way can lead to attracting more buyers and elicit multiple offers.
When pricing it is important to have this conversation with your agent. Your agent should pull the research of recent home sales and have a thorough discussion with you as you go to price the home. Your agent can often add real-world market advice to the recent sales so that you can be positioned to price right from the start. I talk more about pricing and preparing your home for sale on my YouTube Channel.