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The Importance of Pricing Your Home Correctly

Posted by James DeLoney on Tuesday, June 8th, 2010 at 11:34am.

One of the most challenging tasks faced by agents is coming to an agreement with sellers on the list price for their home.  Sellers frequently overestimate the value of their home and are resistant to the advice of the agent regarding market value.  Some of the common mistakes sellers make when evaluating their home include the following.  (1) Paying too much attention to the list price of other homes in their area.  A home's list price tells you nothing about the likelihood the home will sell at that price.  (2) Sellers want to "try it at this price because we can always go lower."  This is one of the biggest mistakes sellers make.  These sellers invariably find themselves going through a series of price reductions in an attempt to "chase down" the market.  The price of your home will either put you in the market, or out of the market.  Something most sellers never grasp is that the likelihood of buyers writing offers on over-priced listings is actually very low. (3)  Sellers want to price the home higher than market value so there is room to negotiate and make the buyers feel like they are getting a deal.  Again, a huge mistake. Accurate pricing allows the seller to negotiate from a position of strength and protects against being haggled by buyers.

You're smart if you're asking, "Why don't agents help seller's better understand the importance of accurate pricing?" After all, isn't an agent's job to understand the market and communicate market trends to sellers?  Here in lies a key difference between strong and weak agents.  Weak agents cave-in to the seller's pressure to over-price because these agents need business so bad they will do or say anything to get the listing, which frequently includes agreeing on a price they know is too high.  The graphic below tells you everything you need to know to understand the importance of pricing your home accurately.  Offers made by buyers are typically discounted based on the days on market.  The direct and measurable penalty for over-pricing your home is paying extra mortgage notes while your home sits on the market, and ultimately deep discounts to the buyer.  

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