The Crucial Importance of Pricing a Home the Right Way

In some areas, the saying “location, location, location” as being the #1 factor in real estate is true. In the Hudson Valley, “pricing, pricing, pricing” is the highest and best service we as real estate brokers can provide to our sellers. No marketing strategy tops it. No advertising plan can compete with it. In order to get top dollars for our sellers, we must do our absolute and very best to come up with a price that will not only attract the highest number of buyers but also yield the highest sale price at the end.

Here is an example (one of many I’ve seen in the last four years). I listed a home in Ulster Park two months ago. My market analysis (done by hand, NOT with a computer) provided a list price of $499,900. After discussing this with the sellers, we agreed on $479,900 — $20,000 below market value. We listed it on a Thursday, had some 40 showings over the weekend, and went to “highest and best” where each party has the opportunity to come up with their highest and best offer, by Wednesday at 6 PM. We had eleven offers altogether, some came in around the list price. A few were around $525,000 — already a good amount higher than what we listed the property for. But because we had so many offers (and experienced buyer agents wait until the last minute to submit their client’s highest and best offer) we had one offer that was $650,000, all cash.

This is obviously a great outcome for the sellers. However, had we as the broker not done a detailed market analysis and had we thrown out a higher number as the possible list price, let’s say $525,000, we would probably have gotten four of five offers, all around the list price or lower. The $650,000 offer only came in that high because the agent knew there were ten other offers they competed with.

In a seller’s market, it is impossible to underprice a home. It is simply not possible to place the list price too low if there are 40 to 50 potential buyers for a property. The task of the listing agent is to know the market, know buyer behavior, know market trends, know the area and it’s population, know who the most likely potential buyer is (are they local, from the city, from another state, etc), and know the competition the seller faces at the day of the listing.

A lot goes into pricing a home the right way. In my experience, Zillow and other sites are one-third right, one-third too high, and one-third too low, and therefore a completely unreliable source for pricing. Experience and diligence is what makes for a good market analysis which is 50% art and 50% science. The art part is experience.