The number one priority when selling your home is to achieve the maximum sales price. Although recent sales of similar residences in the same area can give you a good idea as to what the price should be, the range is by no means absolute. Other factors must also be taken into consideration. For example:
- Is the property being marketed to all potential buyers?
- Do photos of the home “sizzle” and include compelling headlines?
- Even the negotiating skills of the real estate professional can make a difference.
There is, however, one caveat that must be observed when you’re pricing your property for sale or your listing risks becoming “stale” in the eyes of potential buyers. It involves what is called the “Price Anchor.” This is the price that a buyer uses as a guide to determining how much they’re willing to pay. For example, if recent sales have closed for around $300,000, a buyer will look to that price as an “anchor” they use to determine what they will pay for your home.
Most buyers also will tend to establish an “anchor price” based on the price of other properties they are considering. If they see another home they like almost as much as your home and it is priced $100,000 less than your home, they compare the lower price to yours and are likely to see the competing property as a better value. As a seller, you have to be sensitive to over-pricing your property, thus benefiting other sellers at your expense. In the example below, where the property is listed at a lower price, a prospective buyer will identify the “anchor price” as the price your home is listed for. The buyer is much more likely to buy the lower priced property because emotionally, it looks like a great value when compared to the price of your home.
You can tell if the higher price you’re asking for your home is helping other sellers by looking at how many similar homes have been put under contract. If everyone else is selling and you’re not, your home has become the “over-priced anchor,” for those sales. Worse yet, multiple sales of lower prices create appraisal issues if you are fortunate enough to find a buyer willing to pay the higher price. If your price is too high, don’t let other sellers benefit from your high price. When competing homes are selling and your home isn’t, it may be time to reduce the price.
Finally, don’t forget there are many other risks associated with waiting to get the higher price. Consider the impact rising interest rates could have on the pool of buyers that qualify to purchase your home.