Pricing your house is never easy, particularly when you put blood, sweat and tears into making it exactly what you want it to be. So when it’s time to put it on the market, the decision of where to price it can be a sensitive one. New Canaan realtors say most buyers want to price their house high and leave room for negotiation. If it sells quickly, they wonder, “Did I price it too low?” But real estate agents agree, pricing to sell is the best approach and will get you the most interest in your home. After all, isn’t the goal to sell your house?
A Delicate Balance
“Everyone wants the most money for their properties, and I want the same thing for them,” says Nicole Steel, real estate agent with Berkshire Hathaway Home Services in New Canaan. She said once she meets with clients and understands their goals and situations she recommends a very specific number. “There is an overall vibe to a house, knowing what the buyers are currently looking for, the overall condition of the home and location,” says Steel. “It all comes into play.”
“The pricing of a house is really an art,” says Rachel Walsh, a real estate agent with William Pitt Sotheby’s International Realty in New Canaan. “You have to price it competitively. You have to predict the future of where the buyer pool is going to value the house and leave room for negotiation, but you can’t work that in too much.”
No house is perfect, so expect some concessions, but take your time and don’t aim too high either, advises Walsh. “You’ll price yourself out of the market.”
“Overpriced houses sit,” said John Engel, real estate agent at Halstead Property, formerly Barbara Cleary’s Realty Guild, in New Canaan, who recommends sellers price their house below market value to get the maximum amount of interest. “Statistically, the vast majority of homes sell within 5% of their asking price.” Engel says realtors often hear sellers say people can make an offer, but buyers tend not to when the price is more than 10% away.
Pricing and the number of buyers
He cites an often-used pyramid realtors refer to in order to show sellers how much attention their house will receive when priced at, above or below market value. If their asking price is 15% above market value, they can expect that 10% of the buyer pool of that price range will look at their listing. If their asking price is 10% above market value, they can expect that 30% of the buyer pool will look at their listing. When priced at market value, about 60% will look at their listing. But if they price it about 10% below market value, sellers can expect that about 70% of the buyer pool will look at their listing, and at 15% below market value, 90% will look at their listing. [See chart.]
Engel says he advises clients to price it below market value and hold firm on their price. “Pick a price that is the absolute lowest price you will accept for the house, put it out there at that price and hold firm. “You’re saying ‘I know it’s a good deal, the market knows it’s a good deal. The realtors know it’s a good deal.’ There is no question,” says Engel.
So how do you determine what that number is? Engel says he employs a variety of approaches with his clients:
1. Look at assessor’s data on the property.
2. Poll other realtors who know the market. “We bring our entire office in to price the property. They write it on a slip of paper and let me know their opinion,” said Engel.
3. Look at recently closed, comparable sales. “The fair price may not be the right price. That might put you right in the middle of 44 competitors,” says Engel.
4. Look at active listings. The attractiveness of your listing’s price is only good as it compares to others currently on the market, says Engel.
5. Look at the replacement value. While this is considered a less reliable measure, Engel says there are many people who look at the value based on what it would cost to knock it down and build a new one.
If you want to get the best price for your house, maximize value before you list it,
says Joe Scozzafava, a real estate agent with William Raveis in New Canaan, and the president-elect of the New Canaan Board of Realtors. He said while in-town properties are very desirable among New Canaan buyers today, location has little to do with value here. “I don’t think there is a location that isn’t reasonable or decent. There aren’t any bad locations here,” he said. “It depends more on whether you want to be 10 minutes from the center of town or two minutes.
What does matter is that the inside is clean, decluttered, neat and simple. “If it is very clean and has all the right features, you are going to get very close to ask if it’s priced appropriately,” Scozzafava said. “Buyers want a transitional look, neutral colors. They don’t want to see a lot of wallpaper or carpeting. They want gleaming wood floors, neutral palettes, so they can see themselves moving into it and living in it.”
Need to be nimble
What if your house doesn’t check all those boxes and doesn’t get any bites? The estimated average time a home is on the market is six months. Should you drop the price? First, consider supply and demand, price point and whether your house falls into a submarket category, which has a longer average.
“Under $2 million versus $4 million is a very different range of expectations, as well as time of the year and market conditions,” said Steel. “It’s commonly understood that most interest will be in the first few weeks. Sometimes it happens you are the only available home in the category when we are discussing listing, and then in the next two weeks, you have five competitive homes. That’s why sellers should not be stuck on a number, because the market is fluid, and you need to be nimble and know how to compete.”
Steel says she believes in price drops more for the luxury market where homes going for more than $3 million are competing with new construction. “You must offer value in this category or you will be on the market for a long time with no results. More time on the market is less money in the end.”
Submarkets are different
If your home falls into a submarket because it is an antique or contemporary, or the price point is very high or very low, it may sit on the market longer than average. Work with your realtor on pricing your home appropriately for your submarket.
If you do have to make a price cut, Engel advised, “try to resist death by 1,000 bucks.” That means, dropping your price little by little, instead of making what he calls a “meaningful reduction.”
“If you have given your house sufficient time, and the market hasn’t responded, make a meaningful cut to re-stimulate interest in the property,” said Engel. Otherwise, the only other option is to remarket the home, he said. If you have chosen a price point that is the absolute lowest price you will accept for the house, hold firm, he said. “Represent the house with different staging changes to the house, new photography, different marketing,” he said, but he warns, “Sometimes no amount of marketing is going to solve the problem of bad pricing.”