Q. What is the best pricing strategy for your situation?
Understand the 4 basic pricing strategies, in order from most desirable to least desirable:
The Fair Deal Strategy
Your property is priced AT market value.
The buyers are thinking, "That seems like a fair deal, let’s hope it’s still on the market when we get up there."
- You should be able to sell at or very close to full list price because your price is realistic.
- You expect to be under contract in the timeframe indicated by the Average Days On Market (ADOM) for your neighborhood/area/price range.
- You can afford to go past ADOM, but you want to sell within a realistic timeframe.
- You are fully engaged in the process and will use Automatic Notification Technology and County-Wide Market Statistics on a regular basis to remain realistic with your list price as the market changes.
- You are ready to move lower with your price IF the market is showing signs of a decline, or competing properties come on the market after yours, you are ready to move quickly in lowering your price in order to remain a FAIR DEAL.
- You must have an experienced Realtor at your side to help negotiate your best deal as most offers will start low.
- The overwhelming amount of sales data suggests this is the MOST PROFITABLE strategy.
The Good Deal Strategy
Your property is priced a LITTLE UNDER market value.
And buyers are planning which homes they will be visiting upon arrival — “That seems like a good deal, let’s be sure to take a look at that one.”
- You should be able to sell at or very close to full list price because your price is better than realistic.
- You need a relatively quick sale and expect to beat Average Days On Market.
- You can afford to go up to ADOM, anything longer may put you in a predicament you’d rather not be in.
- You are fully engaged in the process and will use Automatic Notification Technology and County-Wide Market Statistics on a regular basis to remain realistic with your list price as the market changes.
- You prefer not to move any lower with your price, but will do so IF the market clearly & quickly takes a turn for the worse or no offers have come in within a reasonable timeframe.
- You should always want an experienced broker at your side, but the “good deal” strategy will often times result in stronger offers with fewer issues to negotiate, so your Realtor may not play as important a role.
- Common sense suggests this is the second-most profitable strategy.
The Great Deal Strategy
Your property is priced at WELL UNDER market value.
The most serious buyers are taking time off of work and buying plane tickets — "Now that’s a GREAT DEAL, let’s take a look today or tomorrow before someone else buys it."
- You should sell very quickly at your full list price because you are one of the very best deals on the market.
- You need to sell right away and should be under contract in 1-5 business days from hitting the market. There is a strong likelihood of multiple offers.
- You cannot afford any significant marketing time and must sell quickly, regardless of Average Days On Market. You are likely already in a predicament you don’t want to be in, but a very quick sale will allow you to recover gracefully.
- You will not need to subscribe to Automatic Notifications or be concerned with the local market statistics. Your property should go under contract very quickly, and knowing what is going on in the local market will be irrelevant.
- This is NOT your “bottom dollar” price, and you will pull equity out of the property upon closing. The list price you set using this strategy should never result in a need to further lower the price.
- You must have an experienced Realtor at your side to deal with a highly likely multiple-offer scenario. One offer at a time is usually easy to deal with. Multiple offers become much more complex with additional legal implications and an entirely different set of negotiation skills will be required.
- The profit you earn will be dictated in large part by the expertise of your broker. But the profit will almost certainly be less than either of the first two strategies above.
The Bad Deal Strategy
Your property is priced ABOVE market value.
The buyers know it's a BAD DEAL and are saying to themselves, "What are those clowns smoking?"
- You will only be able to sell in an appreciating market, and usually nowhere close to full price.
- You don’t need to sell in the foreseeable future. Your property will become a “validator” for buyers in the market ..... "compared to that over-priced house, this one’s a deal!”
- You can afford significant marketing time and your property will almost certainly still be on the market long past ADOM. You have plenty of money to stay in the property for the foreseeable future.
- Any serious seller should want to be fully engaged in the process, make full use of the Automatic Notification Technology and understand the local market. As your motivation to sell changes with time, keep these weathervanes of the real estate marketplace in mind and use them to your benefit into the future.
- This is your “dream” price and you have an attitude akin to; “I’ll wait for the market to come up to my price.” This strategy only works in an appreciating market, so hopefully your crystal ball is reliable.
- The unfortunate truth is that your Realtor may very well be the cause of the Bad Deal strategy. Did they lure you into a listing agreement with an overly optimistic opinion of value? Regardless, if your property isn’t getting shown and you’re not attracting any offers, you may very well have the wrong professional on your team.
- Whatever profit you eventually realize must take into account both the carrying costs of a longer-than-normal sale and the opportunity cost of not being able to re-invest the profit sooner. In most cases, the true profit realized in the Bad Deal strategy is lower than in any other strategy.
Auto Price-Reduction
is worth considering when you have a limited amount of time to get your property sold AND you want to try to maximize your profit.
- You have some reasonable amount of time to try and truly maximize your profit with the Fair Deal Strategy.
- Or you don’t have quite as much time, you go with the Good Deal Strategy and hope to capture your Buyer a little more quickly.
- In either scenario above, if your buyer does not materialize by a certain pre-determined date, you agree to automatically drop your price by a set dollar or percentage amount on a weekly basis.
- You need to know your bottom line price, your “drop-dead” sell date, factor in marketing time, standard time to close and plan accordingly.
- This supplementary strategy should be given serious consideration if you MUST sell by a certain date.
- This is not necessarily a smart approach in a down market. You can chase a downward spiral for years.
- This is not an approach to be used in conjunction with the Great Deal Strategy ..... you priced it great to begin with and the property should sell immediately. And if you happen to be getting tired with the Bad Deal strategy, you should simply move onto the Fair Deal game plan.
- You must have an experienced Realtor on your side to go down this path. There are a LOT of components and variables in how to use this approach to your best advantage as a Seller.
Which strategy is right for your situation?
That depends on the situation you’re in!
and we would urge you NOT to discuss your particular situation with ANY broker until you actually sign a listing agreement OR a non-disclosure agreement. Remember, your conversations with potential brokers are not confidential under law unless you sign an agreement that says otherwise.
There are three factors that should come into play in determining the strategy that is best for you. The first two, we can help you make some sense of. The third, only you can answer.
1. Your prediction for the future of our real estate market: Appreciating? Depreciating? Flat? Understand the local economic climate and use your common sense in determining what the future holds. It’s irrelevant what is happening elsewhere ..... you need to know what is happening HERE to make a well-informed prediction. And the more you know, the better your prediction!
One important piece of the piece of the puzzle is understanding the recent sales & listing activity in your immediate neighborhood ..... and we offer easy access to Search Active, Pending and Sold data for every property and subdivision in Summit County.
More importantly, you need access to the “bigger picture” trends in the overall market to gain any meaningful insight as to what the future might hold. To that end, we offer an incredibly useful set of “real-time” Market Statistics including:
- 19 year average price-trends
- list-price to sold-price metrics
- days-on-market (DOM) trends
- overall transaction volume stats
We are always happy to share our thoughts on the future of the local real estate market and encourage you to call or email anytime.
2. Your recognition of the consequences of an inaccurate prediction. For the most part, you can’t get hurt too much if the market is stagnant or appreciating, regardless of your prediction.
The real trouble comes when Sellers fail to predict or, at the very least, acknowledge a depreciating market. Please see the chart below and understand what happened in our most recent depreciating market .....
If you listed your property back in 2008 at something above a fair market value, your property failed to sell at that time, and you were not attuned to the rapidly changing market, you could easily wait another NINE YEARS to get back to “even.”
The slower you are to react to the realities of the market, the more money you lose. History reveals many truths, especially concerning real estate markets. Quite simply, markets change ..... they always have, they always will. Look to the history of our market to understand the consequence of selling at the wrong time.
The information is right at your fingertips! Recognize the consequences.
3. Your personal motivation to sell. For most sellers, it comes down to Time and Money .....
a) Time ..... do you have plenty of time to get your property sold? Or not? Health issues? Time sensitive tax issues? Job re-location?
b) Money ..... do you have plenty of money to afford the ongoing expenses of owning your property? Can you rent it if you don’t sell it? Will your rental income be affected due to the nature of our market?
There’s lots of other factors besides time and money, but these are usually the big ones.
Remember, use all available resources and your best judgment to determine how you think our local property values will fare into the future, recognize the consequences of having a less-than-perfect crystal ball, and come to terms with your personal motivations to sell.
Commit to a pricing strategy for the market as it actually is, NOT how you wish it was.
And maximize your profit for the situation you are in!
Zak & Mike
phone: (970) 470-3060
email: zm@realestatesummitcounty.com
Return to Sell for More Profit or go to the Next Answer.