The Promise – and Perils – of Pricing
Regardless of market conditions, it is critically important to price a home correctly when it first comes on the market. The reason is simple: the first two to three weeks are when the greatest number of buyers who are actively looking are going to see the house.
Sellers who price their home correctly – reflecting the reality of the market – are likely to be rewarded. Those who overreach, who think they can “just wait until the right buyer comes along,” are likely to be disappointed. And that disappointment means sitting on the market and taking a bit hit financially.
We took a look at all of the homes that went to settlement in Northern Virginia in July 2014 and broke them down into just two categories: those that had to reduce their initial list price before receiving a ratified contract (homes with the “wrong” price), and those that came on the market at the “right” price and never had to drop their price.
The consequences of pricing strategy were starkly different, as the table below shows. Those homes that had to reduce their initial list price before a buyer materialized took 2.76 times longer to sell, and reduced their list price by an average of 5.2% before receiving a ratified contract. Those that sold without having to first reduce their price sold at 98.9% of their original list price, while those that had a price reduction sold at a 92.6% of the original list price – in other words, they had a 7.4% discount in price. Buyers will move forward on a home that is priced correctly, and they will pass the others by. It really is that simple.
|Northern Virginia Homes
Settling in July 2014 (resale)
|Homes with "Right Price"
||Homes with "Wrong" Price
|Average Days on Market
|Average Sales Price
|Average Seller Subsidy
|Avg. Ratio of Net Sales Price to Original List Price
|% with Seller Subsidy
|Average Subsidy as % of Sales Price
|Average % Price Change