One of the roles of a real estate agent is to advise their vendors of a pricing strategy. Sellers quite often, against the agent's advice, instruct the agent to “bump it up a little” and the agent is on the spot to “do it or loose it”. Home sellers who demand to inflate the asking price of their property need to be aware of how their higher asking price can affect their final selling price.
Now there is nothing wrong with starting a little higher than comparable sales indicate a sale may occur, in fact, most good agents will recommend this approach especially if the market conditions are in your favour. However, most problems occur when the sellers feel that they need to add an extra buffer on top of the agents suggested asking price. This is where sellers price themselves out of the market and do the most damage to themselves.
Here's your typical scenario.... a real estate agent gives the seller a probable sale price of say $440,000 maybe as high as $450,000 and suggests a starting asking price of say $469,950 ($470,000) . The seller is happy with this but then instructs the agent to market the property for say $490,000 to $500,000. Just to be safe, just to allow a little for negotiation, just so we can come down a little. Now let's put our buyers cap on and see what the effect is!
You're looking at buying, looking in agent's windows; you know you have finance approval for up to $450,000ish. You like the look and sound of a particular property and notice that it has just come on the market but is asking $499,950 ($500,000). That's $50,000 above your budget. Now most buyers know that prices are negotiable, but generally speaking, most feel that you cannot negotiate $50,000 from the asking price and consequently will more than likely move on and not even make an enquiry.
The seller is oblivious to this situation, and as time passes starts to suffer frustration from apparent lack of interest, although buyers are inspecting the property, there are no offers forthcoming. The property gets stale as the buyer pool knows it's been for sale for a while and think that there must be something wrong with it because it's not selling.
Ok, so as a seller, motivation is starting to kick in, you now need to attract some attention. Even if you drop your price back to the agents initial suggested asking price it may not have the desired effect, mainly because it's been on the market for a while, and buyers have formed their opinions. Unfortunately a drastic price reduction may be necessary to attract some attention. As a result you may end up selling below the probable range suggested from day one.
When a property first comes on the market, it gets the most attention. It's new, it's fresh. Buyers looking in your area will notice it as being new to the market and will be keen to check it out. It is critical to have your property priced correctly when you first hit the market. It can of course be a little high, but the key is not to go over the top. Done correctly you are almost certainly assured of a healthy level of inspections and perhaps some offers to consider.
It is your property and it's always your choice whether to accept an offer or not, so don't price yourself out of the market, generate some interest, get an offer and work with it until you are happy.
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