If you are a homeowner trying to sell your home, you should know about a troubling statistic that is rarely talked about. In 2011, almost 47% of homes that were listed on MLS (Multiple Listing Service) to sell were either 
cancelled or expired— meaning they did not sell! Obviously, agent ability and marketing play an important role in this percentage but inaccurate pricing is still one of the biggest reasons you have less than a 50/50 chance to sell your home.
Watch John and Anthony on Fox25 Offer Tips on Pricing Your Home to Sell
We all see those homes that have been listed for 197 days, 364 days, or even some as high as 1100 days. These homes all have one thing in common: they started out priced too high and then fell into the trap of “chasing the market down.” “Chasing the market down” is a dangerous game of playing catch up in a market that has been declining since 2005. Let’s outline a typical example:
A Seller is advised from a professional Realtor that her home is worth $350,000. Instead of listing the home accurately, at this price, she decided to try and sell it at $420,000. After 60 days and no real activity she drops the price to $409,000 and then after another 90 days goes by she goes to $399,000 and this continues for over 6 months until finally she decides to drop the price to the value that the professional had recommended from the beginning, $350,000. Instead of selling now at that price, she gets an offer for $319,000 and that is all they will pay. What happened?
3 Reasons The Home Didn’t Sell:
1) The market continued to stay depressed and dipped even lower over the 6+ months the home was listed causing the Seller unable catch up to the correct value.
2) The increased days on market (the number of days the home was listed for) caused Buyers to steer away from the home and think something was wrong with it. It was also never seen by real buyers for the home since those buyers had set their search criteria to a maximum of $350,000 and only saw the listing when it dropped to that.
3) Almost 10% of the market value was lost due to the high days on market, limited buyer activity and declining market. If the home had been priced correctly from the start the home would have sold within 2% of the asking pricing.
This scenario, which plays out every day in real estate, cost the Seller almost $25,000—not even including the additional carrying costs and maintenance of carrying the property for 4-5 additional months! Remember, study after study shows that you will get more for your home if it is priced correctly from the beginning due to increased activity and less time on the market. Everyone, including your agent, wants to get as much for the home as possible.
Let’s also be completely honest. No matter how good or experienced a Realtor is, in this market, they will misprice a home at times. It is not intentional, but sometimes the market has a mind of its own. If this happens and you realize that the price of the home is too high, don’t panic, it simply means you need to make an accurate adjustment to get an offer. This is also where experience will pay dividends. Making an incorrect adjustment is like not making an adjustment at all—nothing will happen and the home will continue to sit on the market. We have always relied on our “Target Pricing Model,” which is illustrated below:
Target Pricing Model
Many times Sellers and agents struggle with how much to drop the price, our model creates some benchmarks to follow. As you can see, if the price is accurate: bulls eye—an offer will be made on your home! This should happen within the first 30 days of marketing.
If your home is:
| Getting Showings, But No Offers | Then the Price is 3-5% off |
| Getting Drive-ups and Low Showings | Then the Price is 6-11% off |
| Getting Drive-bys Only | Then the price is 12+% off |
Keep one thing in mind: no one likes to adjust their price, not the homeowner or the agent, but sometimes it is needed and “chasing the market down” will get you nowhere.
So the rule of thumb is price your home correctly from the start, but if your agent misses the mark, don’t fret, follow a sound adjustment strategy and your home will be sold in either case!
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