Angelo Lambropoulos – Director, ScanMe Realty
Should you set the price high, expecting buyers to bargain you down? Or should you start low to attract a lot of attention, expecting buyers to push the price up?
With so many competing properties for sale, yours has to pop out immediately as good value or buyers will move on with no intent of returning. You get one first shot at your home’s debut, it must be nothing short of ‘perfect’.
The amount of traffic that a listing (home for sale) gets in its first week is five to seven times what it gets in its following weeks. As an example, if you were advised to initially ‘test the market’ in order to lower the price later, it’s bound to be noticed for the wrong reasons – that discounted price adjustment (later) has therefore been broadcast to a much smaller audience of buyers, and will also portray an unfortunate poor perception (the ‘market’ starting to classify the home as ‘damaged’), when the actual fact of the matter is ‘poor strategic marketing’.
A home sellers job is seemingly simple one would think? You analyse the competition thoroughly, you know the prices of the properties that have recently sold in your neighbourhood, you know of similarities/differences from your home, and you also know the current competition. All that’s needed is to now price it right and make a sale, which should seem a fairly straight forward process, right? Wrong! Science proves us otherwise; as humans we tend to let our emotions and attachments get in the way, a perfectly normal psychological characteristic.
Home sellers and purchases are often loaded with an illogic and irrationality (which I once again reiterate, is perfectly normal) commonly known as the ‘endowment effect.’ This is where the tendency for things, even little things become worth more in our eyes once we own them; in short, humans by nature have a tendency to cling on to things.
Readers: Would you agree, that the pain of a loss is two to three times greater than the joy of an equivalent gain? In other words, how would you emotionally respond to receiving less than what you had initially paid for something? Think about this, honestly! I’d be interested to hear your feedback.
Here’s a quick snapshot of 5 quick expert pricing tips to help you gain the upper hand in whatever market it is you decide to sell.
1. Identify your home’s true value; this takes ‘skill’. The first step is imperative. You must have a price on your home; test the market at your own risk.
2. What would you do as a buyer? Would you buy a property that is over-priced, would you look at a property that has no price point; or would you prefer to look at a property listed at ‘fair market price?’
3. Time or Money? – Decide on how quickly you need to sell.
4. Discount Danger – Make no mistake, putting a low dollar value on your home is encouraging the ‘wrong buyers’.
5. Price adjustments – If your property has been on the market for months, a slight price adjustment will do you no favours. You must bite the bullet, making the price adjustment ‘substantial’ – this is dependent upon the property and the psychological implications of the price.
If your agent of choice ever comes back telling you “it’s a tough market out there”, I would highly recommend you politely ask them: What do they know of pricing psychology? Hopefully they will soon understand the ‘market’ doesn’t always have to take the fall, an agent should soon open their eyes and start to realise that buyers and sellers may not be the only ones suffering the ‘endowment effect’, it may very well be the agent’s narrow-minded egotistical approach (old habits) getting in between the sale?
I can’t wait to see what the future holds for real estate, I don’t think it will be much longer until real estate consumers may soon be presented with a nice little alternative… ‘Transparency’ perhaps?
Upon conclusion, it is imperative you conduct your own research so you are best prepared for any feedback and/or excuses you may be hit with, selling a property isn’t as hard as you may think. Don’t be scared to ask questions; seek solutions, not excuses – it’s your right as a home-seller.