Properly Priced Home and Sandwiches

You know from last week's installment of 'How's the Market These Days' that it's currently a sellers' market out there.

An evil temptation arises when the media or an unproffessional realtor whisper 'seller's market' into a potential seller's ear. They start to believe - if it's a sellers market we can get thousands of dollars more for our house than it's really worth.

This is pure evil mixed with unintelligence. Well, maybe not that bad, but it's a horrible idea.  

A properly priced home has been, is, and always will be the best marketing strategy for selling any home. There's a science behind pricing a house. A home is only worth what an educated buyer is willing to pay for it.

There's no better way to explain the importance of pricing your home appropriately than this:

I love the brisket sandwich at Big D's Smokehouse at the Calgary Farmer's Market.

At $9.95, it's a little pricey for a sandwich, but on par with lots of other sandwiches out there. What sets it apart is that it's so delicious, the price is totally worth it. So I stand in line, drool while Big D cuts into the moist, glistening brisket, happily choose my toppings like a kid at the 5 cent candy counter, and smother it in the fabulous barbeque sauce. I haven't even tasted the sandwich yet but I'm happy to pay for it.

The perfection in this senario is: I am blissful while I zone out and murder a succulent sandwich, while Big D makes a profit. Everyone is happy.

But let's imagine...

If suddenly 50% of the other vendors at the market closed down for renovations.  There would suddenly be less supply of deliciousness at the market. Therefore, more demand for Big D.

(I know this would never happen, but) What if Big D, recognizing the increased demand, got greedy and raised the price of brisket sandwich to $22. I don't care how good the sandwich is, as an educated sandwich buyer, there's no way I'm paying $22 for it. Especially when there's a market full of other delicious choices. I'd start eating smoked meat poutine or a taco platter or butter chicken. And I'd be perfectly happy. Big D is no longer making any money.

A week later, after only selling sandwiches to people who have no idea what $22 can get them somewhere else, Big D would probably drop the price back to $9.95. The problem is, I'm no longer walking slowly passed Big D's. I put my head down and go directly to A Taste of Quebec or Los Chilitos or Shef's Feiry Kitchen because I know I'm getting appropriate value for my money.

Maybe one day, months later, I walk by Big D's and notice that he's dropped the price to $7.95. So I get a sandwich and remember how much I love it. I'm happy. Big D is sad, though. He's not making nearly as much money as he could be if he wouldn't have gotten greedy in the first place.

The same senerio plays out weekly in Calgary's housing market. A seller gets greedy and puts their house on the market 10% higher than it should be. No one buys it because they can get a comparable home at an appropriate price. After a month of not selling, they might adjust the price to where it should be. But educated buyers will question - why hasn't it sold, what's wrong with it? Another few months pass and they drop the price again. Now the home sells for 10% less than it could have and the seller has made a few mortgage payments that could have been avoided.

I will say it again: just like the delicious and appropriately price brisket sandwich at Big D's, a properly priced home has been, is, and always will be the best marketing strategy for selling any home.

If you're curious as to what the proper value of your home is, call or email me. I'd be happy to provide you with a current market evaluation. If we put it on the market, you can choose what price you want to list it for, but I will always provide with my honest opinion of what an educated buyer will pay for it.