The Best Thing You Can Do to Sell Your House

Here's a piece from MSN Money that details the psychology of buying a home. The piece contains some very interesting insights into how to best sell a home. For instance, consider this:

You're selling your home. Here's the big decision: Should you set the price high, expecting buyers will bargain you down eventually? Or should you start low to attract a lot of attention and get the inevitable discounting over with upfront?

This is a classic scenario, right? Since people have been selling homes they've faced the "price high and drop later" or "price aggressively" decision/trade-off. And almost everyone I've known (including me) has done the former. Wrong move. Here's why:

Experts agree that starting high with the idea that you can always drop it later is a costly mistake. Pricing doesn't just determine how much money you stand to make -- it also dictates whether buyers even give your home a serious look.

With so many competing properties for sale, yours has to pop out immediately as a good value or buyers will move on, unlikely to return. You get one first shot at your home's debut, and it's easy to blow it.

"The amount of traffic that a listing gets in its first week is five to seven times what it gets in its ensuing weeks," says Glenn Kelman, the CEO of Redfin, an online brokerage and listings site. "Let's say you lower the price (later). No one will notice. You really are broadcasting that discount to a much smaller audience of buyers and will have the perception it is damaged goods."

The conclusion here is that you need to price you home correctly from the get-go. They state this more clearly a little later in the piece as follows:

Your job as a seller seems simple: Price it right to make the sale.

Identify your home's true value, and set the price slightly under that. At worst, you'll lose about $10,000, but you might make a quick sale. If you're further under market than that, buyers are likely to bid the price back up, Kelman says.

An error on the high side, however, can cost you more than just time. Once you drop your price, buyers smell blood. "They say, 'He's knocked $30k off the price; he'll do it again.' It's death by a thousand cuts," Kelman says.

As I said, I've done the "price it high and drop as needed" strategy myself and it's almost never worked out well. The one time it did was when we were in a seller's market in a highly attractive town and development.

I know this is accurate from a buyer's standpoint as well. When we were looking at homes, if something was priced too high I knew it and sometimes didn't even so see the home (sometimes I would, but I went knowing that they would need to come down $50k to be in line with the market.) Of course our agent was always telling me why the price was a good one as is. Yeah, right. I quickly got tired of that and started discounting her opinion. She was there to get me to buy at any price (even if it was a bad deal for me) and that's that.

When we had our home on the market for a month or so two years ago, my wife and I had a "discussion" about pricing. She wanted to go high and drop the price later. I wanted to go low and sell quickly. We ended up with a middle-of-the-road price that didn't get much traffic in to see the place. It didn't really matter since the home purchase we were going to make fell through, but the experience did reinforce what the author is saying in this piece.

So to conclude: pricing your home correctly (and if you error, do so on the low side) is the single-best way to see it quickly. Seems like common sense, but in reality it's not applied that often.

Comments

[Matt]

I am going through buying a house right now. This I think is fantastic advice. An inflated price in this day and age is a really bad in my mind. I don't know what housebuying was like for my parents but I imagine that they relied on the agent more than we did. My wife and I looked at houses on many of the available online tools that let you look up houses in the area you're interested in and then emailed our agent the houses *we* wanted to go see. You can set filters based on price. If you over price your house, you're not even going to show up on our radar. This happened a number of times during our wait (we are buying a short sale) where we saw houses that had been on the market for months suddenly appear in our filter because the price dropped that were ones that we'd be interested in buying but were already locked into another offer.

[Mark]

Agents may price low to generate a quick sale, but they also often price high to "buy the listing". I experienced this about 10 years ago when an agent I thought I could trust convinced me to list at $350K. Eventually we droppped all the way to $280K, and even then it took a while to sell. (By the time it sold, it was listed with another agent, so she lost out.)

Stale goods indeed!

[Michael]

"Let's say you lower the price (later). No one will notice."

I'm not convinced this is the case. As with Matt above we did most of the searching ourselves. Since we were searching based on our price range if something new showed up in that price range we would've seen it.