What is the real price of a home ?
I'm getting a lot of questions from my coaching clients on how to arrive at the right price of a home and should they be looking to reduce the price of their listing. Here is the response I just sent to a friend of mine when he asked for me to help him make the decision as to whether or not he should take the advice of his agent and go for a significant price reduction.....
I looked at your listing. One thing to remember is that realtors use comps to arrive at the price of a home. The challenge with that is that the information is historical data and does not necessarily reflect what is happening in the market. today. There is a chance that there has been enough of a swing in the market to cause your home to no longer reflect what buyers are willing to pay. That is something that agents track and I'm sure yours has done that. Secondly, when buyers make comments like "the house is to small" or "the kitchen needs work", they are saying the same thing as the buyers that say it is priced to high. What they are saying is that they don't see the value and the cost as being in alignment. So you can redo your kitchen and keep or raise your price, or you can adjust your price to what buyers have shown they are willing to spend for homes with similar kitchens. I'm sure you would prefer to opt for the second.
Lastly is the question of how much to reduce the listing. One thing to remember is that it really is impossible to under price a home. If you do, you often will end up in a multiple offer situation and drive the final sale price up. Therefore, I would go for the bigger reduction. If you get multiple offers, then you will make more. If you don't then you know that the house was never going to sell for the higher number. Either way, you win because you get the home sold. In other words, go for the $10,000. You will not be leaving money on the table.
You see, in the end, it is the market that determines the price of a home and the market is driven by what buyers are willing to pay for certain features and benefits. Successful Real Estate Sales People study the trends in the market to help them determine what buyers are looking for and what they will pay for it. The day your home went on the market there may have been only a couple of homes similar to your home yet a week later there were 10 similar homes. If there are only 3 buyers then you need to compete at a different level than the week before. This information needs to be conveyed to home sellers in a way that causes them to understand that as circumstances change so does the value of your home in the eyes of the buyer. It is still the same home but in a different market.
Remember that days on the market work against the seller and for the buyer. Keep your days on market short through proper pricing and you will achieve the highest value for the home.