I recently was working with a potential client and we had a hard time seeing eye to eye on what his house should be listed for. The house has been on the market for over 15 months and has been listed both as a FSBO and with an agent from another company. The original listing price back in mid-2008 is a full 20% higher than what I suggested we list it at. All my research on comparable sales over the past year for the neighborhood as well as active listings pointed me to the price I suggested. The list price, price per square foot and everything else supported my decision. Are their differences in the house and the comps? Sure, there always are. Some may have an extra bedroom or a smaller yard while others don’t have central air or an updated kitchen. These pluses and minuses are always taken into account to come up with a price that I think will SELL the house. The problem isn’t logical, it is emotional.
In today’s market, particularly for houses that have been on the market for a while, most owners become fixated on two issues related to price. The first, and most obvious, is the price they need to sell the house for to still break even in their total investment. While this is sound financial reasoning, they don’t realize that the housing market is a function of the current supply and demand which is not at all related to what it was when they purchased the house. Like the price of gas, the price fluctuates daily and the price you paid one month ago may never be reached again. There are markets, agriculture and commodities, that allow buyers to set and agree on a price today for product that may not take possession of for many months or sometimes years. The real estate market has no such feature; the price today may or may not be the same tomorrow. In a declining market, like the one we have been in for the past few years, the odds of the value (price) going back up over the short term are very low. If you can get $XXX today, the price you will get a week, month or year from now will likely be less.
If you must sell in the current market, you must get ahead of the curve and not chase it. This means you not only must price in line with comps, you really need to price LOWER than the comps. All things being equal, the cheapest of five comparable houses will get the most attention. Now is not the time to think “I am giving $XXX dollars away by pricing it lower than everything else”. Rather it is the time to think “I need to SELL the house, if I make money great, but it is time to move on and cut my losses.” Ideally you can wait to go onto the market when prices are on the rise. If not, be the smart seller on the block and let the other buyers wonder in a few months why they can’t now get what you got when you sold your house “too cheap” months ago.
