In the greater Seattle area, we have been seeing a consistent trend for the last year or so of a seller’s market. This means that in this market, sellers tend to reap the benefit. A sellers’ market is denoted by anything less than 3 months of inventory on the market. For homes that are priced correctly, in this type of market, we’re seeing multiple offers from buyers. So, what happens when homes aren't priced correctly?
Priced Low
If a home is underpriced, it can attract not as many qualified buyers. To try to put this simply, say a home comes on the market for $500,000 but in reality, the home is worth $675,000. The price point of $500,000 is going to attract buyers that are looking for homes within the price range of $500,000-$600,000. This is a problem because you'll miss the whole section of buyers who are looking in the $650,000-$800,000 price range. What tends to happen is that a particular seller will receive offers that might range from $475,000- $700,000. However, only one or two of the potential buyers will be actually able to afford come to up over the $675,000 mark that the home is worth. This is really a losing situation for sellers, more offers do not necessarily mean more money.
Furthermore, you'll attract buyers that will strain their finances in order to get the home, sometimes these buyers wake up the next morning and go “o no what did I do” this results in a deal that flips. In conclusion, when you price your home too low, you could potentially not hit the correct financially qualified buyer pool.
Priced Right
Now let’s look at if you took the same situation but brought the home on at a “market value” of $675,000. You're going to pull a buyer population that is more prepared to escalate over the asking price. Once someone walks through the home and falls in love, usually it’s really hard for them to walk away if they can afford to spend the money. So, a seller might be able to get well above the $675,000 mark if multiple people are interested.
Priced High
When a house first comes on the market that is when the home gets the most activity. Why? because it’s new, shiny, and cool, no one has seen it, so there is heightened energy around it. From the previous example, say that the home came on the market for $800,000- and the home’s value was $675,000. People are automatically going to look at the listing and go “it’s overpriced,” or “I don't want to spend that much,” therefore buyers won’t even take a look at it. If you're lucky maybe someone will come in and love it! However, most of the time the listing will sit on the market.
Eventually, the seller will come to the realization that they need to drop the price. By that time, they'll drop the price closer to $675,000 however the initial “buzz” from the listing is now gone. Maybe, someone will circle back and give you an offer however, if it sits on the market for a while buyers know there isn’t a high potential for multiple offers, so the offers usually come in lower than what the home is listed for. This nets the seller usually with less money than if the seller had come on the market with a competitive price and created multiple offer biddings.
Conclusion
Pricing is SO important when listing your home. Pricing under market value will net you less qualified buyers and therefore less money. Pricing at value will give you the right pool of buyers, and enough activity to potentially get more than what the fair market value of the home is. Overpricing your home will cause the house to sit on the market, which is hard to recover from. As a seller do yourself a favor and get an agent to help you price your home accurately in order to get the most money for your house!
