Setting the correct price is without question the most important strategic decision you and your broker will make when selling your property. Initial prices that are too high will almost always result in properties sitting on the market, growing stale and eventually selling for less than they would have if priced correctly from the start. Pricing too low can leave money on the table. But, sometimes, pricing a bit low or high can be used to maximize return.
Understanding basic pricing strategies will help both sellers and buyers get to !!DEAL!!
Checking recent similar sales and setting a price 10% higher is undoubtedly the most frequently used strategy. It was a great one in years like like 2011-2016, when there was little inventory but lots of pent-up demand from buyers who'd sat on the sidelines after the great recession of 2008, and the market, finally rising again, had clearly not yet reached it's top.
But today's market is very fragmented and complex. Some segments clearly have a glut, some still have a lot of competition (See NYCREB: How to Tell if You're in a Buyers/Sellers Market, March 26). There are still some listings that generate multiple competitive offers immediately, but there are also many that sit on the market for weeks or months with no offers.
The situation for each property is different and should be analyzed separately. Are there plenty of similar-enough properties already on the market? Is there some essential factor truly unique about this property, that would make someone absolutely have to have it? Have there been recent infrastructure or demographic changes in your particular market segment impacting desirability, like a new subway upgrade or school, or a shift in the job market? Once those factors are analyzed, here are the 3 Basic Strategies brokers will suggest you consider when pricing.
1) Market Price - This is the price at which a property should find a buyer within 30 days, or 30 serious viewings, whichever comes first. It is determined by looking at all similar and competing properties on the market that a buyer would probably look at, and setting the price for yours so that when a serious buyer -- one who's been looking for a while and probably seen those properties -- walks into yours they say, "This is a good deal!" Once that happens, the buyer will then look at similar properties that have sold within the past year, to make sure the price still seems valid, and you and your broker should have also.
2) Reach Price - This is a little higher than Market Price, but the seller is willing to wait for that one special buyer to come along who is willing to pay it. This can work sometimes, particularly if there truly is something distinctive about the property that justifies waiting for that one particular buyer. But there is a danger: that the property will not sell, will sit, become stale and scare buyers away ("Everybody wants what everybody wants, and nobody wants what nobody want.")
The hedge to this is to have a DISCIPLINED plan from the first day of how long you will wait, and on what day you will adjust the price, and how much you will lower it. The adjustment at that point must be significant to overcome the built-up skittishness. You will need to avoid chasing the market down - lowering the price only a little at a time, not enough to overcome the decreasing desirability. The new price should probably be a bit below what Market Price (as discussed above) would have been on Day 1. That may sting, but it will avoid selling for an eventually much lower sale price by chasing the market down.
3) Stimulus Price - This is a price below Market Price, designed to stimulate demand, viewings and multiple offers, resulting in bidding wars that might drive the eventual sale price above where Market Price would be. Back between about 2011-2016, it really felt like 90% of new listings engendered bidding wars within a few days. Today that seems to happen only occasionally, but they do happen. Selecting this option depends on a few factors: (a) whether or not there are many similar apartments on the market, obviously buyers will be less willing to compete on price offered if there are several similar properties; (b) what is the general strength (buyers/sellers market?) of that particular market segment; and (c) the seller's stomach for that strategy, which no broker can help with.
All these questions become less critical in times when the market is clearly one thing or another - strong or weak. But in a market like this one, with shifting and confusing elements of both strong optimism and uncertainty, careful review of these can at least be a sound framework for decisions.
Please do not hesitate to contact me, with no strings attached, if I can ever answer any questions or assist you or a friend to think through these issues.
Associate Broker, Citi-Habitats
(Office) 646-484-7885 / (Mobile) 917-538-4516
I strive to cause your friends to thank you for referring me.
Associate Broker - Platinum Award
387 Park Avenue South 4th Floor New York, NY 10016
Real estate agents affiliated with Citi Habitats are independent contractor sales associates and are not employees of Citi Habitats. Citi Habitats is a licensed real estate broker located at 387 Park Avenue South, NY, NY 10016. All information furnished regarding property for sale or rent or regarding financing is from sources deemed reliable, but Citi Habitats makes no warranty or representation as to the accuracy thereof. All property information is presented subject to errors, omissions, price changes, changed property conditions, and withdrawal of the property from the market, without notice. All dimensions provided are approximate. To obtain exact dimensions, Citi Habitats advises you to hire a qualified architect or engineer. This is not intended to solicit property already listed. Equal Housing Opportunity.