Real Estate Article: The Absolute Pricing Method in Today's Real Estate Market
04/09/2007

Many sellers have the mentality that overpricing their properties can maximize their proceeds. They believe that if they increase their asking price, given a buyer really likes their property, they will have a chance to make more money. In addition, if the buyer decides to bargain with them, they can afford to lower the price a fair amount and still get market price and possibly better for their property. This method of pricing is definitely the wrong approach.

[Source provided by imrmls.com]

According to research conducted by MRMLS (Multiple Listing Service) using their statistical data, the number of potential buyers you have viewing your property is inversely related with your asking price relative to the market price. If you price your property at market value, you will have about 60% of the total potential buyers visiting your property. If you increase your asking price to 10% above the market value, that number will drop to 30%, at 15%, it drops to only 10%. Conversely, when you lower your asking price to 10% under market value your property’s exposure will increase to 75% and at 15% under the market value, 80% of all the potential buyers will view your property.

Taking that data into consideration, as a seller, pricing your property at market value probably sounds like a good idea. In a normal market that would be the case, however, the current market favors buyers; merely placing your property at market value will not get the job done. I believe that the most efficient method of selling your home is to set your asking price at 2-3% under the market value. There are probably those of you who feel unwilling to make the 2-3% price adjustment but before you decide, you should hear out my reasoning.

As I mentioned earlier, the current market is a buyer’s market. Only about 1 to 2 properties sell out of every 10 properties listed. In order to successfully sell your property you need to ensure that your property holds the greatest value for its price. Imagine a buyer deciding between 10 homes. 5 of the properties are priced above market price and the other 5 properties are priced at the market price. This buyer would most likely be deciding between the 5 market priced properties but because they are all priced at market value, the decision will be really hard. If one of the properties was priced just 2-3% below market value, this property would have the competitive edge needed to win the decision in this situation. Now you are probably thinking, “Yeah, I got the sale but I lost out on 2-3% of my property’s value,” but that is not true. In a slowing market, the time value of your property is extremely important. Every week your property does not sell is costing you, it is costing you not only in terms of value, but also time and energy. You should also keep in mind that once your property has been sold it does not necessarily mean that the remaining properties are next in line. There are new listings entering the market all the time, meaning they will have more competition. By the time a few of the other sellers are also willing to lower their asking price, they will probably have to make a bigger adjustment on their properties which have already decreased in value form when you sold yours.

In the end, the 2-3% in which you lowered your property’s price by actually ends up saving you’re a lot of trouble. Not only will your property’s exposure be increased due to its price but you will also be able to beat out your competitors, prevent yourself from losing a larger amount of money in the future, and also save a lot of time and energy.

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