This is so common, perhaps it ought to have been first. But here it is nevertheless.
Often times people have preconceived ideas about selling real estate and setting a price. Usually, these ideas can be boiled down to one of two:
1) Start high and let ‘em talk you down.
2) Start low, attract a lot of people, and get multiple bids.
In some cases, these strategies can work to the seller’s advantage - to a point. However, too high or too low, even when it IS the right strategy, is still the kiss of death.
The reality is, in the large majority of cases the correct strategy is to PRICE IT FAIRLY!
START HIGH: Sellers sometime expect that a buyer will want to haggle. The logic follows that if you price it too close to fair value, you won’t have any room to go down on price. This doesn’t work. For starters, usually the only reason someone is trying to “talk you down” on price is because it’s priced too high. People pay fair market price for houses in ALMOST every case. They don’t overpay, and there’s rarely an opportunity to underpay. The second reason this doesn’t work is what I call the “Stale Bread” metaphor. Bread is worth the most when it’s fresh out of the oven. By day 2 it’s worth less, by day 5 worth less, and by day 7 worthless. In a lot of cases, your home is similar. It’s greatest value is when it is new to the market. Once it’s been sitting a while, people start to wonder what’s wrong with it - why hasn’t it sold? As well, there tends to be the greatest amount of traffic and interest in the early stages of the listing. More traffic, more interest, more demand, more value. Simple as that.
If you price high you risk scaring off prospective buyers who don’t want to “insult you” with a low (read: fair) offer. That is, if they bother to look at your home at all!
START LOW: This can be risky business. In a strong seller’s market, it becomes common to “underlist” a home to attract more buyers, thus creating a lot of activity and bringing in multiple offers. The hope is that, with enough offers, buyers are more inclined to bid the house up beyond its fair value. Something like people getting carried away at an auction.
In reality, this DOES work some of the time. The problem is, it’s only SOME OF THE TIME. So the question is, what will you do if it doesn’t work? You can find yourself having missed the initial wave of great traffic and trying to sell that stale bread. In some cases, this can greatly reduce the final sale price on your home.
So the moral here? Price your house right. Price it according to fair market value. Don’t try and play games or be too tricky. The market will figure you out quick and it’ll end up costing you