Pricing Your Home: The Good, The Bad And The Ugly
By Craig Lowe
Real estate agents are always waxing lyrical about achieving a 'premium price'. But what does this really mean? Is the price not simply the point where the buyer and seller agree to do the transaction? The answer is yes. But an important feature of real estate prices is that they can be enormously influenced in either direction - in favour of the buyer or seller - depending mostly on the marketing choices made by the seller. My goal in this article is to offer some insights into what a 'premium price' actually is and how the chosen pricing strategy directly affects your likelihood of achieving one.
Buyers do not view homes in a vacuum. People make decisions based on the whole spectrum of experience they have had in the market, such as the features and asking price of each house they have seen. This is important because, while sellers have the ability to set the asking price, it is ultimately the buyers who decide what they are prepared to pay. By setting a high asking price you can easily help someone else sell their house by making it look like a relative bargain. Furthermore, if a high asking price is seen by buyers prior to inspection - usually in the advertising - a certain expectation is set in their mind. This sets the stage for disappointment upon viewing. My favourite analogy of this phenomenon is when someone raves about a movie but when you see the movie you are slightly disappointed, even though it’s good. This is one reason why the idea that buyers' can always make me a lower offer' doesn't work. Buyers simply walk away because they need to be excited by a property initially to get to the point of wanting to make an offer. Instead they have made a negative value perception.
‘Time on the market’ heavily influences buyers’ perception of value. Buyers want homes that are fresh. There is a perception that old stock is undesirable or 'something must be wrong with it', if it hasn't sold. If you have created the perception that your house is overpriced it will sit on the market for a long time and it will get harder, or even impossible, to achieve the 'premium' that was initially on offer. Finally, new buyers coming into the market are not ready to make offers immediately (in general, people look for a month or more to 'learn the market') and the 'pool' of motivated buyers who are ready at that point in time have been wrecked by the pricing strategy. This is precisely why premium prices are achieved in short timeframes and the idea that you can 'start high and drop the price later' is a bad strategy.
It appears buyers ultimately set the price of our homes. Which brings us back to the question of what a 'premium price' is and how to achieve one. The key to which is to think in terms of competitive strategy. We want the competition to be between buyers for your property instead of between your property and other listings. This is the only consistent, high probability, way of driving your selling price as high as possible.
A competitive process, such as a tender, with no 'fixed price’, does not set high expectations or help the neighbour’s property to sell instead of yours. We can ensure your property is more appropriately positioned in terms of the 'perceived value' in the marketplace. Additionally, the urgency created by a set timeframe - a deadline for offers within the critical first weeks of marketing - ensures optimal excitement amongst the pool of 'ready' buyers. Human nature means that once someone has fallen in love with your home they are more likely to pay a higher price for it, particularly when in competition with others, than they ever would have dreamed of initially. The highest offer from a 'spread' of competitive bids is nearly always far above what can be achieved by any 'fixed price' or 'by negotiation' strategy.
Extracting a ‘premium price’ from the market takes skill and experience. I know with certainty that working as a team with a collective 30 years of experience under our belts, my team is selling properties for better prices than ever before. It's not possible to describe the process in full here, so please feel free to call me anytime on 021-764-647 for a free no obligation appraisal of your property’s value and a brief presentation on the detailed process we have developed to get you a premium price for your home.