Selling Your Property? Don’t Make This Pricing Pitfall

You have decided you want to sell your property. Your real estate agent has pulled comparable sales and arrived at an estimation of the market value of your property, but you think “why shouldn’t we put it on the market at a higher price, at least for a while, and hope someone buys it? A buyer will make us an offer if they like it.”

Why is this a problem?

The best way to get the highest price for your property is to price it correctly from the beginning. Research shows that properties that languish on the market because they are priced too high sell for lower prices than properties that were priced well when they were first introduced to the market.

A property generates the most interest in the marketplace, and is best positioned to sell, during its first few weeks on the market. During this time it is crucial for it not to be over-priced. Most buyers are searching for properties via automated searches on the internet and they have a specified cut-off price. If the property falls outside of their specified price range, they won’t even know your property is available – so how could they possibly make an offer?

So, the overpriced property sits on the market for the first few weeks without any interest. Even if the price is then lowered, the initial rush of buyers is over, and now potential buyers wonder why it has been on the market so long. They may think that there may be something wrong with the property. It is a natural reaction to not be interested in something that no one else is interested in, so the damage is done. You may have to drop the price below market value to generate more interest, and your holding costs continue to mount as the property sits on the market.

How do you arrive at the best initial listing price for your property? (Underpricing has its own associated issues.) A good real estate agent, perhaps with the help of a local appraiser, will conduct a market analysis, reviewing comparable sales and competing properties. This will allow your agent to arrive at a price that should be close to the fair market value of the property. You can then review this information with your agent to decide where to price your property. Slightly above market value is OK, but too far over market value will lead to the problems outlined above. Pricing the property at, or near, its market value and remaining firm when the offers start rolling in (and they will) is always the best policy.