Posted by David Krulac on September 24, 2003 at 06:23:53:
doesn’t work in many areas or markets. Generally only works in high inflation/appreciating markets.
Too high pricing is probably the single reason most properties don’t sell. High pricing will also lenghten your days on the market.
Pricing is a tricky part of the business and many agents and most fsboS don’t have a clue.
“The house across the street sold for $100,000, so I want $125,000.” This “logic” doesn’t even say that his house is worth more. Once an owner told me that he wanted more for his house because his neighbor was a disagreeable person and couldn’t get along with anybody. Therefore since he was such a nice guy you should pay more to buy his house?
The two major components of pricing are 1. analyzing and getting good comps and 2. price point pricing.
#1 takes practice and can be a developed skill. Its basically what appraisers do. You want recent actual sales within the last 6 months of as similar properties as possible, as close as possible to the subject. If you’re working in a subdivision with 300 houses that has only 3 different models, this shouldn’t be too hard. If the house is unusual or drastically different, then this is more difficult.
But the more you do comp work and the better you know your area the better you will be.
I knew an appraiser that worked for a relo company and they would fire you if your appraisals weren’t within 5% of the actual sale price. That’s hard to do day in and day out, but you had to do it if you wanted to keep your job.
Secondly gasoline priced at 153.9 and cars priced at $9998 are examples of price point pricing. A Ford Focus at $9998 sounds cheaper than a $10,000 price.
I once priced a house at $99,990 to stay below $100,000. I’ve never priced a house at $101,000 or $102,000. Buyers think in terms of round numbers. They don’t want to spend more than $100,000, or $130,000 or $200,000 or what ever the number is. If you’re before that threshold, you’ll get noticed. If you’re above their threshold, they you’re off their radar screen. This is even more important if your property is listed. The buyer tells the agent they want to spent less than $100,000, the agent does a computer search of less than $100,000 and your $101,000 house doesn’t make the cut of eligible candidate homes.
Personally I’d rather sell slightly below market and have quick sales that sqeaze the last nickle and take a long time to do it.