Setting the right price for your home is part art and part science. It’s about understanding market dynamics, buyer behavior, and the unique features of your property. In this guide, we will explore different pricing approaches, providing insights and tips to help you choose the best strategy for your home sale. Whether you are aiming for a quick sale or seeking to test the market’s top value, understanding these strategies will empower you to make informed decisions.

Understanding Market Value

Market value is the price that a property is likely to sell for in the current market. It’s the amount that a willing buyer and seller would agree upon, given that both have reasonable knowledge of the property and the market conditions.

Real estate agents use various methods to determine market value, including:

• Comparative Market Analysis (CMA): Evaluating recently sold properties in the same area with similar features (location, size, age, condition).
• Current Market Conditions: Analyzing the balance of supply and demand, economic factors, and seasonal trends.
• Property Specifics: Considering unique features, upgrades, and any aspects that may add or detract value.
• Appraisals: Professional appraisers provide an objective assessment of a property’s value based on standardized criteria.

Pricing Strategy #1 – Pricing Below Market Value

When you price a property below market value (often called underpricing), you are telling potential buyers, “Hey, come look at this house. You don’t want to miss out on this great deal!”

This is generally the best strategy for sellers motivated to sell quickly, whether it’s due to a major life change or another reason. A smaller price tag creates a competitive environment, perfect for attracting buyers and generating multiple offers. In some cases, this may lead to a bidding war that drives the price closer to or even above the market value.

Pricing below market value is most likely to work in a seller’s market, when there’s very little inventory and plenty of buyers in need of a home—or when the home is in less than desirable condition. However, in a balanced market or a buyer’s market, this is not the best strategy. When buyers see a home listed below market value, they may wonder if something is wrong with it.

Pricing Strategy #2 – Pricing at Market Value

The next pricing strategy is to price at market value—based on recently sold homes that share characteristics such as location, square footage, year built, whether the home has a pool, etc.

This strategy places your home in front of the most qualified pool of buyers. Serious buyers and their agents will recognize when a home is fairly priced and worth every penny—and will be eager to see the inside of your home, yielding more showings.

In a competitive market, this strategy will get you an offer in the least amount of time and could even result in multiple offers. In fact, it’s not uncommon that this strategy results in a sale above the list price due to the interest it generates. When a home sells for more than it was listed for, it is a clear indication that the pricing strategy was spot on.

Pricing Strategy #3 – Pricing Above Market Value (For a Reason)

Pricing above market value can be used to test the market’s response to a property that has special attributes. This approach can be effective when implemented correctly.

This strategy is particularly useful for unique properties, homes in desirable areas with limited inventory, newly built or fully renovated homes in neighborhoods with significantly older homes, or homes that boast rare features and/or incomparable views. It is also useful when there is not enough data available to arrive at a price based on comparable properties. Consider using this strategy in a seller’s market, when prices are rapidly appreciating (and are expected to continue to do so for some time). If one or more of these circumstances apply, you could hit a sweet spot, set a new record, and give your neighbors a nice little gift by bumping up property values.

Setting a price above market value can cause your property to remain on the market for an extended period. Sometimes, when you’re testing the market, the initial price may be too high, and a price change may be required to sell your home.

Pricing Strategy #4 – Pricing Above Market Value (With Emotion)

Pricing above market value without a reason to justify it, or aspirational pricing, is less of a strategy and more of a mistake. This is common among sellers who have a strong emotional attachment to their home and persuade their agent to list it at whatever price they desire.

We get it. Your home is a special place. It’s filled with cherished memories. It’s where you raised your children, celebrated holidays with your family and friends, and had some of the best days of your life. However, prospective buyers don’t have the same emotional ties to your home that you do. To them, your home is just another option.

Aspirational pricing can backfire if your property remains on the market for an extended period, as buyers may come to the conclusion that it is overpriced. This will ultimately get you less money in the end.

How to Choose the Pricing Strategy for You

Choosing the right pricing strategy is extremely important. To achieve a successful sale, you must balance your personal goals with market data.

A common mistake is to hire whatever real estate agent tells you the highest price. Some agents just want to get your listing, whether they have done sufficient research to justify the price or not.

When you meet with us to strategize your home sale, we’ll go over all of your options—with an emphasis on reviewing comparable properties, what else is under contract, days on market, supply and demand, economic factors, and more. We’ll pay careful attention to what makes your home unique, whether it’s an amazing view, prime location, special finishes, or all of the above. In the end, we’ll help you choose the optimal pricing strategy to reach your goals.

Give us a call at 702.605.7482 to get started.