Pricing Mistake-Testing the Market

Starting at a high listing price to "test the market" is a common mistake that will cost you money. Don't let misconceptions about choosing a listing price tempt you to ignore your REALTOR®'s research and advice and learn this the hard way.

It’s understandable that sellers are eager for maximum profit, but unfortunately some make unwise pricing decisions and wind up making a lot less than they could have. One unwise decision is to ignore the market research and advice from the REALTOR® and insist on a high listing price to “test the market”.

Some common misconceptions about setting a listing price:

• Nothing is lost if you start at a high price to see if someone will make an offer. The price can be reduced later, if there’s no interest. Prime selling time is during the first 30-45 days on the market when interest in the house is at its peak. If your initial listing price is too high, REALTORS® won’t show the house because it likely won’t appraise and the buyer won’t be able to get a mortgage. Also, today’s savvy buyers who have shopped on-line will realize they can get more for their money elsewhere. Your house will sit without showings and the listing will become stale.

• The listing price should be more than you paid for the house. The housing market is cyclical, like the stock market. Prices don’t always increase, especially if you bought the house at the top of the market.

• The price should be at least as high as the tax value, or appraisal value. Tax values also change with the market. Appraisal values can vary depending on the purpose of the appraisal, such as establishing a replacement cost for insurance purposes. These values should be considered, but not given undue weight.

•  The price should be higher than your neighbor’s selling price because you think your house is better.  It’s natural to be proud of your home, but pride shouldn’t get in the way of smart selling. Remember, “When you choose your listing price, you choose your competition.” Visit comparable houses for a reality check.

• The price should include the full cost of repairs and improvements. Payback on upgrades is normally a percentage of the cost, and varies by type of project. Many upgrades are made for your benefit and enjoyment and may appeal less to others who won’t pay a premium for them. Repairs often are necessary expenses, not grounds for increasing the value of your house.

Smart Selling Tip:
Testing the market by setting a high initial listing price is unwise and will cost you money.