When setting an asking price, there are two schools of thought: In one, agents overprice properties in the belief that a higher asking price will draw higher initial offers from potential buyers. Some real-estate agents take the opposite approach, pricing homes below nearby properties in hopes of starting a bidding war.
In an interesting study done by the Journal of Economic Behavior & Organization:
Sellers who listed their homes…
This same study published in the Journal of Economic Behavior & Organization in May, found that homeowners who set the initial asking price 10% to 20% higher than similar houses in the neighborhood see a slight increase of $117 to $163, on average, in their sale price. Pricing a home 20% or more than similar houses leads to an impact three to four times as big.
As a real estate agent, I tend to be more in the middle of these two varying strategies. While under-pricing a home will draw in more interest and bring in more offers (see chart above), many of those potential buyers are hoping to score a “deal.” When they find out the house is going to sell for 10-15% more, they will drop out and move onto something else. On the other hand, overpricing could lead to the home sitting on the market longer. It will receive less offers, but it ultimately may fetch a slightly higher sale price when it does finally sell.
I normally advise my San Diego home sellers to price their home close to the actual market value of the property. This will bring in serious home buyers that are less likely to drop out and cancel the transaction during escrow. Of course, the homeowner is the one who has final say in determining the actual asking price of the home, their real estate agent is simply an adviser. As an adviser, it is my job to determine what is best for the homeowner in their own unique situation. This must also be taken into account with current market conditions, in order to work out a strategy that represents the best interests of my clients!
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