Hi. I am new at real estate investing and new to BP. I'm looking to sell a SFH in Pittsburgh, PA, that I have held for 5 years.
My question is about setting the asking price for the listing.
Should I set a high asking price and reduce it gradually until I get an offer (or offers), or should I price it right around where I think it should sell for and stand firm?
My assumption is that retail buyers are more informed these days with all the resources available to them, so I feel that they would be unlikely to overpay. Of course, I have no evidence to support this yet. I am looking for advice from the forum. Would I simply be wasting time by listing too high?
I believe you are right that buyers are, in general, more informed. There should be a range of appropriate prices, and being near the top isn't bad, but you don't want to be over-priced. Here is the logic I use when explaining it to my brokerage clients:
Lets say at the time you list the property, there are 1000 people looking, and a new 100 people every day. On day one of the listing you have the opportunity to grab the attention of 1000 people. If your property is priced 'out of the market', you have trouble getting those people back. Instead, with every price change you will get the new days 100 people and perhaps some of the 1000 that were already looking... but probably not all of them. You are at the mercy of their search setup. If they've ruled out your property, it may never show up for them again.
So, you are best making sure you are in the right price range, even if its a little on the high side. If you are on the high-side of the market, make sure there is a reason for it... if you have a completely upgraded, painted, repaired house, then being the highest price/SF might make sense.
Also keep in mind your goals... if it is to turn around the property quickly, you may be better off going on the low end, or below market, just to move the property quickly. Also, I do know some brokers who like to price below market to generate lots of interest and hopefully cause multiple offers and a bidding war. This can work, but I'm never all that comfortable with it, unless I (and the client) are willing to accept the lower initial price, if there are not multiple offers.
I would also say it's area dependent. Out here in the Central Valley a lot of nice homes will aim low and let he must've offers bid them out. Them they get 25-50k more than they would have expected. Back east I have never seen that strategy work!
Price it right the first time and go from there. If the area is indeed "hot" you will get bidding wars.
If you price it too high some buyers wont even look so it will sit on the market lingering, you then start reductions and next thing you know, everyone is wondering whats wrong with it.
Don't overprice it thinking you can just lower the price. The longer your house is on the market, the less you will generally make. Buyers think something is wrong with the home and will offer less if it has been on the market a long time. In many markets right now, a long time may be 30 days.
Price it in the middle of similar comps - not the highest or the lowest, and work with any offer you get. The old realtor saying is the first offer is the best offer you will get. If you get few or no showings within the first two weeks, it's time to lower your price.
I think it all depends on your market and the market conditions. It is never good to price it too high as that will disinterest many from the get-go. If the demand is high for that particular area, I would price it around 5% higher than the highest comp there in the last 90 days, assuming you have the same condition. With so many buyers out there, you will get immediate attention of your listing and create a bidding war and ultimately get it sold for above list price if in a hot market. There are so many things that need to be taken into consideration so make sure you do enough market research and properly analyze your market.
I tend price high and lower it quickly.
The first price should be at the high end of the comps, maybe slightly above. I then cut the price by about 2-3% every 3-4 weeks. Each time the price is cut it tends to grab some interest. Eventually it will find a price that a willing buyer will like.
There are 3 problems with trying to price it right initially. The first is that not all buyers have the same taste. Some will be interested at higher prices than others. So trying to guess the right price is way too tough.
The second problem is that buyers today have lots more information than they had even a decade ago. It's really hard to sell a property for significantly more than it's worth. So getting it to the right price quickly is crucial.
A third problem is that buyers are continually entering and leaving the market. A price cut brings attention quickly to people who are in the market. Agents can talk about using various ways to attract attention to a property, but a price cut is usually one of the best. And grabbing the attention of a buyer that's either just entering or thinking about leaving the market is where I've sold most of my places.
Thank you everyone for the great advice. This is very helpful.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.