Real Estate pricing is something that can be a very polarizing topic among all parties involved – buyers, sellers and agents. In today’s market, there are many strategies that can come into play, and each has their own marketing campaign that jumps off of this one item that drives the campaign direction.
Regardless of the “type” of market the industry is in, your real estate pricing strategy and your initial asking price should always be the single greatest factor in a successful sale.
Listing Above Market Value: Lofty Pricing
There are advantages to listing above market value – the biggest is providing room for negotiation come offer time. It’s also a strategy that’s put into place as sellers enter the peak-season selling periods. Sellers are able to reassure themselves that money hasn’t been left on the table.
But there are several disadvantages that should be considered if you and your agent are considering this path. Knowledgeable, qualified buyers may get immediately turned off because of your hefty price tag. If they’ve done their homework, they’ll know the value of your home based on several factors and may just brush over your listing for that reason.
You may also position the competition in a better place than yours, if they’re priced lower than you. Your home may also sit on the market for a long period of time, resulting on too many days on the market, and a low-ball offer.
In the end, you may end up reducing the price of your home and putting yourself in a situation that you don’t necessarily want to be in and accepting an offer that’s much lower than you had hoped for.
List at What the Property Will Sell For: Market Value
The biggest advantage of this real estate pricing strategy is you will attract the right buyers who are qualified and looking in their pre-approved price range. You’ll also be able to more accurately predict your time on the market, based on comparable sales in your neighbourhood.
Buyers looking will respect your pricing strategy and want to act quickly before other buyers become interested in think about an offer. It creates that sense of urgency every seller strives for. You’ll also have a better chance of entertaining multiple offers with this strategy – much more likely than the Lofty Pricing mentioned above.
If you’ve been thinking about selling for a long time and your home or condo is in A+ shape, staged well and the right market plan is in place, you’ll feel comfortable and confident with picking this pricing strategy.
But this does come with some disadvantages, as do all strategies. No one has a crystal ball and the market can be very unpredictable at times. As a seller you may have a hard time with the unknown –could it have sold for more?
This is probably the one major disadvantage of this strategy, but if you’re working with a good agent that goes beyond a simple home valuation and comp analysis, you should feel comfortable with your decision.
Pricing Below Market Value: Low Pricing
A lot of people attempt this real estate pricing strategy, but not all succeed. We believe there should be a good reason for below market value pricing, because it’s not guaranteed to work. Many media outlets like to publish headlines “SOLD 100k OVER ASKING” and we shake our heads each time we see this.
Let’s clarify a few things first – just because a property sold for 100k over asking, DOES NOT mean it sold for 100k over what the market value states the home is worth. If a condo is valued at $800,000.00 but was listed for $700,000 and sold for $810,000, it actually sold for $10,000 over market value. Does that make for a good headline? SOLD FOR 10k OVER ASKING – doubtful you’d click on that story.
A Recent Example of Low Real Estate Pricing
We’ve been in a situation recently where we recommended this this pricing strategy and the reasoning had a lot to do with our sellers’ situation.
The first was a relocation – our clients were faced with a sudden incredible opportunity in Alberta that they took advantage of, positioning them in a must-sell situation. By pricing this home slightly under market value, we were able to put a marketing campaign into place to get the most amount of attention within a very short period of time.
Our sellers knew they had to sell, so they wanted to see how much they could get for their home. By pricing under market, the hope was to generate enough buzz among buyers that a bidding war would take place on offer day, or even better than that – a preemptive offer.
And that’s just what happened. We received a preemptive offer that was 18% over current market value – what the market said we should have priced it at.
This is a good example of when this king of real estate pricing strategy worked. It’s not always like that but it does add for a bit of excitement, to say the least. We had over 50 showings in three days (sellers were out of town which helped immensely), and a great deal of interest from qualified buyers who knew what we were going after with this strategy.
But there can be disadvantages to this strategy as well. You will likely get A LOT of showings – which could be a big inconvenience if you’re living in your house or condo with your family. You also run the risk of many of those potential clients not being able to afford what you’re looking for.
If they’re working with an out-of-town agent or one that doesn’t know the market well, they could be wasting your time. You could also risk getting all low-ball offers and frustrating buyers who are sick of bidding wars.
Real Estate Pricing: Our Best Advice
If you’re looking to sell your home, our best advice is to work with an agent who knows the market, can help you understand each of these strategies and how they can or cannot work for the sale of your house or condo.
Look at each option complete with numbers. Don’t be shy to ask your realtor. We always provide our clients with various options along with our recommendation – together we come to an agreement. It’s not always this way or that.
Keep that in mind as you work towards listing your home, and if you’d like us to pull together each scenario for your house or condo, simply fill out our form below. We’ll be in touch right away for a no-pressure chat. We’re here to help you understand the market today.
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