How the Wrong Pricing Strategy Could Cost You Thousands
By: The Rick Wearing & Sandra Parrott Team
You may be aware that the List Price you set for your property may have an impact on how quickly your property sells — and how high the Sale Price might be. What you may not realize is just how significant an impact it has. Consider the following information.
You list your property well above its Market Value. (Market Value is described as … the price at which any parcel of real estate sells. Market Value is the worth of that parcel of real estate viewed in light of the prices at which other comparable parcels of real estate have been sold. Value emerges from many sales, price emerges from every sale.)
As a result of pricing your property well above its Market Value, many buyers may not bother to see your property while searching for properties to view, because it is outside of the price range they have established for themselves or the one established by the mortgage financing company they will be using to finance their property purchase.
Those who do see your property in their search, may be confused by the higher List Price of your property compared to other properties currently on the market Listed for Sale with similar features & amenities to your property, and may even be suspicious of why your property might be priced so high. They may wonder, “What’s going on here?”
In this scenario, your home may languish on the market for weeks or even months longer than it normally would have, had the List Price been set accurately in the first place. You might even need to lower the price dramatically at some point during the listing period to re-ignite interest from other Realtors and potentially interested buyers. In the end, in this example, your property will in all likelihood, sell for less than if you had originally set the List Price accurately.
You price your property just a couple of percentage points lower than what is necessary to gain the interest of qualified buyers and other Realtors. That might not seem like much of a problem. How much can a couple of percentage points matter ….. well, it can matter a lot.
On a $300,000 property, pricing your property just two per cent lower than necessary could cost you up to $6,000 on the sale. That’s a serious amount of money!
So, as you can see, pricing your property right and from the beginning is serious business and not something that should be taken lightly without research & analysis of the current market and conditions.
There are a number of factors we use to help our listing clients review and set an accurate list price for their property.
Here are two examples:
Historical local Average Ratio List Price compared to Sale Price:
Based on MLS sale information during the period from January 1, 2015 to December 31, 2015, the Average List Price of a residential, non-waterfront home in Huntsville was $298,981.60.
The Average Sale Price of a residential, non-waterfront home in Huntsville was $289,981.60
The difference between the two (List vs Sale) was $9,000 or 3.01 per cent.
This means that on average, over the past year, the difference between the List Price and the Sale Price is 3.01%. If you set your List Price accurately from the beginning, the Sale Price of your property should ideally fall in that same range.
Historical local Average Days on Market:
Another pricing indicator that you might find helpful is Days on Market. This number represents on average, how long a property has been exposed to the market from the List Date until the date the property is Sold firm with no conditions. Based on the above noted time frame (Jan 1/15 – Dec 31/15), the average Days on Market was 77. That means that all properties if priced accurately from the beginning should be Sold within that 77 day time period.
In addition, there may be other factors that will influence the List Price/Sale Price based on individual circumstances and especially in our area, where many properties are uniquely different, as well as the Seller’s circumstances for selling and how quickly they may need/want to sell.
Fortunately, a good REALTOR® knows how to help you set the right List Price. One where you will obtain the highest possible Sale Price for yourself and a List Price that will enable you to sell within a time period which is completely satisfactory to you.
A couple of areas where our Real Estate Team excels in helping our Sellers set accurate List Prices is by utilizing our combined 55 years of experience successfully listing and selling properties in our area. As well, Rick is a designated MVA-Residential Appraiser, a designation granted by the Ontario Real Estate Association to formally recognize Realtors who demonstrated experience and education in residential appraisal (i.e. Establishing Market Value).
Selecting the proper List Price is not just a science but is also an art and should be based on your personal wants, wishes and circumstances, in addition to current market data and conditions. Please feel free to contact us for an obligation-free, confidential meeting where we can discuss the List Price recommendations and Market Value of your home, cottage or condominium.
Please call 705-788-3535 or email us at: [email protected] today!
Statistics quoted are from information provided to Realtors by The Lakelands Association of Realtors for the time period Jan. 1st, 2015 to Dec. 31, 2015.
All information provided is from sources deemed to be reliable but cannot be guaranteed.