Why Home Sellers Should Raise Their Asking Prices
Every morning I check the "hot sheet" from the Tallahassee MLS, and I then compare it with hot sheets from the past. Invariably (meaning about every week or so), I catch a home seller who has chosen to raise the asking price on the home they are trying to sell.
Now long-time readers of the Tallahassee Real Estate Blog know that we are battling a high failure rate among home sellers in our market, so doesn't it seem strange that there are people out there (with homes that are not selling) that are choosing to raise the asking price?
Is this really the best thing to do to get a home sold?
Reasons To Raise The Asking Price On A Home
There are some valid reasons why a home seller would raise the asking price on a home.
For example, maybe the seller has put a house on the market that needs repairs and has priced it below market. With little or no activity coming in, perhaps the seller has chosen to repair the home and then raise the asking price to reflect these repairs.
Or perhaps the home has just hit the market and the agent made an error when typing the asking price. When the agent corrects the error, the listing would show up on the hot sheet as a raised price, even though it was merely a correction of a mistake.
Finally (and stretching the boundary on reality a bit), maybe the seller elected to renovate the home in order to profit from the work. This happens from time to time. A home is purchased as a "flip." The buyer immediately puts the home on the market, prior to renovations, at a price that would yield a nice little profit with no work needing to be done. But once work commences on renovations, the price is adjusted higher to reflect the anticipated higher market value due to the renovations.
One reason that you won't see here is "because the market is going through the roof and sellers are getting multiple offers." You see, that is a reason to price a home correctly to begin with, not to "raise the asking price." For the purpose of this article, raising the asking price specifically focuses on asking for more for a home that has not sold at its current price.
Reasons To Not Raise The Asking Price On A Home
For every reason that we can find to raise the list price on a home, there are scores of reasons why it is not warranted. For example, often times home sellers think bringing a home to marketable conditions warrants a price increase. They consider:
- putting on a new roof
- replacing an aging HVAC (heating/air conditioning system)
- landscaping overhaul
- new pool liner
- repaving the driveway
- new carpet
- new paint
But the fact is, all of these things are what buyers expect when they buy a new home. Won't you? Would you pay "market price" for a home that needs a new roof? I bet not.
When you sell your home and go to buy your next one, will you expect a discount for any major system that is not in excellent condition? I can tell you that buyers in the Tallahassee real estate market have these expectations.
NOT EVERYBODY SUCCEEDS
Did you know that more than 30% of home sellers fail with their first listing agent?
That's right, they end up waiting and hoping for a lone buyer to come in and offer anything for the home when they instead should be seeing multiple buyers competing for their home.
Sell your home fast and for top dollar, we'll show you how!
Why Home Sellers Raise Their Asking Price
Several years ago, I started tracking the homes with "raised prices" and found them five times likelier to fail to sell than their counterparts that never raised their prices.
Since we are in the business of helping home sellers (and we even specialize in selling homes that previously failed to sell), we always ask these sellers "Why?"
Just about all of them have given us an answer that included the word "agent" in it. For example, we've been told:
- My agent said I needed to put a new roof on the house and we could just raise the price to cover the cost
- My agent recommended staging the home and to add the cost of it to the asking price
- We raised our asking price to help pay for the driveway and pool liner
- Our agent said raising our price would expose our home to a new set of buyers
and the list goes on and on.
And it is all bad advice.
Your Asking Price Is Critical On The Internet
First of all, if you do not think the internet is a critical component in the sale of your home, I recommend you do some more research. At last count, 94% of homebuyers are using the internet when shopping for a home. It's not enough that you are "on the internet," you have to use the internet to herd the right buyers to your home.
The asking price you put on your home determines which homes will be used as your competition. Every penny you add to your asking price, the tougher the competition you face. The converse is true as well. The lower you go, the better you look.
There is a "best asking price" for your home, and it is not something you want to figure out over time. You will get your best buyer (the highest price and best terms) if you hit the market with the best initial asking price.
The foolish advice that recommends you increase your asking price to attract a different pool of buyers can be translated to this:
Let's raise your price. The people that have seen it at this lower price don't think it is a good value. Maybe people who are looking at nicer homes will think this is a good buy.
Maybe the people with "more money" won't care as much when it comes time to spend money on a home? Is that what this advice is based upon?
The advice you need as a home seller is more important today than it has ever been. The internet is a game changer, and establishing your initial asking price for your home is the second most important thing that you will do as a home seller.
Want to know more about getting top dollar for your home? Do you want better advice than "hey let's raise your asking price!" Just drop me a note and we will reach out to you to see how we can help.