Why is setting the right price so important
When dealing in hundreds of thousands and increasingly millions of dollars typically funneled through a real-estate transaction, it’s easy to get all tangled up in emotions. And that makes sense.
For most of us, more money passes just under our noses at the notaries than we may ever save in a lifetime. In a single transaction, in a single moment, our most tangible asset gets liquefied. The chips fly and fall where they may, and all parties walk away with the deal they got. Incentives run high for everyone to come out a winner. No one wants to leave wealth on the table, so putting your house on the market combined with realistic, measurable goals is vital to finding the right price and achieving a successful sale. But what’s the right price? What’s the right strategy if you’re wrong and priced too low or too high?
Time it right
Most people focus on price for obvious reasons, but when you sell it, today, in 6 months or 2 years is going to affect the price. So before you determine your asking price we help you clarify how and when you need to sell your home, and what are your red lines. Your red lines when it comes to time determine the strategy as much as your red lines on price. In other words, it’s important to define your timeline precisely to anchor your expectations to achieve your goals.
What is the right price?
The market determines your final price, but that’s not the whole story. The market today determines your final price today or soon, but down the road the market will determine another price. Sometimes higher, but not always. The market changes all the time. Sometimes quickly! It’s important to know where you are on your roadmap and keep your eye on your timeline. You want to get the best price, but timing is equally important. More on the “right price” at the bottom of the page.
Priced too low.
Someday, in all likelihood your home will be worth double, or perhaps even triple or more what it’s worth today. It might also be worth a lot less. So price is function of time, and no one knows what time will bring.
If you get the price on the low side you’re going to get strong demand. A client recently whet through this with an agent who’d grossly underpriced her home, only to find themselves in a bidding war in less than a day after going to market!
Depending your goals and strategy, this isn’t so bad. But it also means that you’ve strongly favored speed in favor of price. This client risks leaving a lot of money on the table for a savvy buyer.
Priced too high.
So setting your price today should be set with the realistic goal of being on the market for no more than 3 months. It’s harder to plan for the long term. So your price and closing date should be based around current market conditions not exceeding 3 months but preferably much less. So it turns out that while the final price remains hidden until a sale, both the buyers and vendors timelines can be more fixed.
Getting the right starting price and adjusting very little is ideal. Getting it wrong and the price too low leads to a bidding war. But getting the price too high then, followed by overlooked offers is to be avoided at all costs.
Time, greed and risk.
No likes to be wrong, so sometimes talking about price can be sobering. As one real-esate agent said to me, “No amount of fancy photos and wishful thinking is going to sell a home if the price is too high.” But vendors are susceptible to being bamboozled, many of them often demand it.
So it’s no surprise agents use this strategy to get a listing and test the market, a fair stratagy no doubt, but if the market prove weak at that price something has got to give.
But the vendor ultimately decides the listing price, so getting the right price is the most important part of the process.