Pricing Strategy - Should You Overprice Your House?

Posted by Joe Manausa on Friday, March 12th, 2010 at 9:35am.

Pricing Strategy - home sellers who do not understand the evolution in pricing strategy will find that they are chasing away homebuyers.

If you have to sell a home, I have an important tip that is crucial for you to understand. The internet has created many changes and opportunities in the real estate market, and home sellers who do not understand the evolution in pricing strategy will find that they are chasing away homebuyers.

One big questions that home sellers always want to ask is how much "negotiating room" should they include in their asking price for a home. I'm sure Google has seen the following more than once!

Overpriced Home Picture

To Sell A Home - Think About How To Buy A Home

The easiest way to understand the answer to this question is to take a look at the housing market from the vantage of the consumer (the homebuyer). If you study the way a buyer goes about the process of buying a home, then you will be able to understand the smartest techniques that you should use to sell a home.

Before Computers - In the "old days," buyers would start the home buying process by talking to a REALTOR® about selection and availability. You see, REALTORS® were the "gatekeepers" of the information about homes for sale in the market. There was no internet, no great consumer MLS search tool, so homebuyers had to talk to a real estate professional to find out about all the properties for sale in the market.

Before the use of computers, each office had its own "book of business." If somebody wanted to sell a home, they would list is with a real estate broker that they felt would get it exposed to the most buyers possible. The broker would advertise in newspapers and magazines, and would put a sign in the yard and hold open houses.

Pricing a home before computers required a lot of experience, as the real estate company had sketchy records of what homes had sold for in the past. The better brokers were the ones that could "remember" more of the past home sales. The "advice" that brokers gave back then on pricing included "leave some room for negotiation" because nobody wanted to "leave any money on the table."

Before The Internet - Once the industry started using computers, a "shared database" of information was available that broke the lines of brokers' books of business. Now every member of the computerized MLS could know what was available in the entire housing market, and they also now had a database of recent home sales that gave everybody the opportunity to have "a great memory" for what homes selling prices.

But because this information was still available to the real estate community, it did very little to change the advice that REALTORs® gave to their clients who needed to sell a home. The thinking was that homebuyers had to get their information through the same network of real estate professionals, so there was no need to change the pricing strategy in the market. But if that was wrong then, it is grossly incorrect now!

The Internet Age - REALTORs® are no longer the gatekeepers of the information. The consumer has the same access to the properties for sale in the MLS as do real estate professionals, so the process of buying a home has changed greatly. If you have to sell a home, you better understand this now, or you will join the majority of people who fail in their attempts to get their home sold!

Buyers Select A Price Range

The National Association of REALTORS® has published survey results showing that 94% of homebuyers who recently purchased a home used the internet during the process of buying a home. The very first thing a homebuyer does to "look at homes" on the internet is to enter a price range to reduce the amount of search results. Think about it ... nobody wants to look at all of the 4975 homes for sale in Tallahassee, they just want to see the best homes in their price range.

Key To Selling A HomeSo the first part of the screening process includes entering a range of values that the buyer believes covers everything they may want to buy. This is the whole key to understanding how to use price to sell a home!

The key to understanding home pricing in the internet age is understanding that every penny that you add to your asking price could very well take you out of somebody's price range. If a buyer enters a range of $250K-$280K, and you are priced at $280,000.01, then you would not show up in that search!

Imagine that you own a home that you would be able and happy to sell for $275K. You decide to "add some room for negotiation" to your asking price, and put it on the market at $295K. Now imagine a homebuyer who would absolutely love your home and is qualified to buy a home up to $275K.

This buyer will click on the list of homes for sale in the MLS and enter a search range. Imagine if the entered range was $260K to $280K. This buyer would have 136 homes to view and never even get to see your home!

This example occurs all too often today, with home owners using a dated pricing strategy that works against them. Don't join the growing list of home sellers who fail to sell a home, price your home to sell and move on with the rest of your life!

Resources For People Who Must Sell A Home

Do you want to know more about the Tallahassee real estate market? It is not as hard as you might think keeping up with the movements in the housing market, you just have to know where to look. The following are some of the best resources that you can find on Tallahassee real estate:

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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