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Pricing Tip #2: Turn The Pyramid Upside Down

Tuesday, February 26, 2019   /   by Dennis Isip

Pricing Tip #2: Turn The Pyramid Upside Down

Every homeowner wants to make sure they maximize their financial reward when selling their home. But how do you guarantee that you receive the maximum value for your house?

Here are three keys to ensure that you get the highest price possible.

1. Price it a LITTLE LOW (Turn the Pyramid Upside Down)


This may seem counterintuitive, but let’s look at this concept for a moment. Many homeowners think that pricing their homes a little OVER market value will leave them with room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).

Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price it so that demand for the home is maximized. By doing this, the seller will not be fighting with a buyer over the price but will instead have multiple buyers fighting with each other over the house.

Realtor.com gives this advice:

“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”


2. Remove Barriers for Buyer Hesitation


There are 2 documents that I highly recommend:

- Pre-Inspection Report - and show that you’ve addressed the items listed in the report. This will minimize any buyer hesitations regarding the condition of your house.

- Appraisal - Although there is no guarantee that you will get this price, an appraisal will also minimize buyer hesitations regarding the value of your house.


3. Use a Real Estate Professional


This, too, may seem counterintuitive. The seller may think they would make more money if they didn’t have to pay a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by a real estate professional.

A study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”

The results of the study showed that the differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%. Sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.


I have personal experience in this one too. One client first tried to sell her home FSBO at $379K. She did it for a couple of months, even using the Spokane listing service. Eventually, she turned it over to me to launch a social media campaign. We found the right out of town buyer,  and closed at $415K. My seller made $31,000 more in this transaction.

Conclusion

Price your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your house.

 

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Haven Real Estate Group
Cambria Henry
304 W Pacific Ave; Suite 360
Spokane, WA 99201
509-590-4701

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