Every time I meet with a seller one of the main topics we discuss is how to price their real estate to maximize the sale price while minimizing the time on the market. Most people have the belief that pricing real estate a little higher than the market value will give them flexibility to negotiate when the right buyer comes along.
This is the conventional approach that most sellers take but I can show you with hard data that this approach leaves a lot of money on the table for the seller. Below I will show you how to price your real estate to put you and your family in a position of power throughout the selling process.
While this is the most common approach to selling real estate, in almost every case the sales data proves that you will get more money if you start at or slightly below the market value. Buyers are more educated than ever so they can spot an overpriced piece of real estate as they’ve probably been searching for weeks or even months online.
What happens when you start above the market value is you get some traffic but the savvy buyers don’t come to see the unit as online viewings have taken the place of first showings. For all my listings I shoot 3D walkthroughs and listing videos so buyers can get a feel for the home before they come to see it.
What happens around day 25 is the traffic to your home decreases dramatically. Why is this? Put yourself in the shoes of a buyer. They’ve been looking for months and a new property hits the market that looks like it might be the one. They rush over to see it in case it’s their new home. This is the same phenomenon with listings (just the reverse) so it’s not too surprising that about 80% of your traffic will come within the first 25 days of being on the market.
As the traffic dies down and we exhaust all our marketing channels (mailers, online advertising, reverse prospecting for buyers in the MLS, social media posts, email marketing, etc) it is time to take a price reduction to increase the traffic to the listing.
The challenge with reducing the price to the market value after it’s been on the market for a few weeks is that buyers no longer feel compelled to write a full price offer in fear of losing the property. Therefore they normally offer 5-7% below the new list price. At this point we’ve missed the opportunity to get the full market value for the property and lost most of our negotiating power. Inevitably, we will end up selling the property 1.5-3% below what we could have got if we had priced the unit at the market value from the start.
Below is the data from the past 12 months of condo sales for 1 bedroom and 2 bedroom condos in the South Loop. In the case of the 2 bedroom condos, units that took a price reduction sold for a median price of $516,250 vs units that did not take a price reduction which sold for $537,000. That is a massive difference to your bottom line.
I also ran this for 1 bedroom units to confirm the data. The median price for the units that took a price reduction was $315,000 vs $335,000 for units with no price reduction. That’s why it is important to get the pricing right from the start.
All this sales data doesn’t take into account the added expense of increased time on market. One bedroom units that had to take a reduction sat on the market on average for 75 days vs 39 days for units that didn’t take a price reduction. This additional 36 days cost the owners in taxes, assessments, insurance and mortgage interest. Not including the stress of their unit not selling and the inconvenience of having to show their unit more and keep their house in showing condition. The story is similar for the 2 bedroom condos which sat for an additional 74 days on average.
Pricing your home is an art and a science. It’s not easy to always hit the market on the head but by using multiple data sources (comps, price per square foot, active inventory, absorption rate, etc) we can triangulate a price range that should be acceptable to the market and should put the most money in your pocket.
I know that selling your home is stressful and my job is to get you the most money in the least amount of time. Valuing real estate is one of my strong suits since I have a quantitive background. If you have any questions about this article or pricing your home, reach out to me and we’ll set up a time to talk.