I just listed this beautiful home and we had a discussion with the sellers about pricing strategies. Did you realize there are three strategies that sellers can use to price a home to get it to sell? So the first one which is often times the most popular one but not the most effective is to overprice the home. Most sellers feel that buyers are going to come in and low-ball them so they want to build in a lot of wiggle room so that they will sell the house at the price that they really want to sell it for. Unfortunately, this isn’t the most effective strategy because most of the buyers who come in are really very well educated and when they see a home that’s overpriced, they know it and they won’t even make an offer because they either don’t want to insult the seller or they think that the buyer probably isn’t going to be reasonable, so they just move onto another home. The second strategy is to underprice the home. Now this is sometimes a very effective strategy, but it has to be the right property. When you underprice a home, you drive a lot of traffic into the home and you hope that all of that traffic will bid the price up and create an auction type atmosphere. Now this can be very effective if the location is highly desirable, or the home is so unique and special that a lot of people would want to bid up on that home. But there is some risk involved because sometimes people don’t bid up the home and you’ll just get offers that are low. That creates a problem because although you don’t have to accept those low offers, what are you going to do? You’ve already price the home low, so are you going to increase the price and what kind of message is that going to send to a buyer? The third strategy is to price the home at fair market value. It’s probably the most conservative yet most effective way to price a home. When a home is priced where it should be, you’re going to attract all of the right buyers and then you should sell the home very close to if not at the asking price. So the next time you’re thinking about buying a home or selling a home, think about the price and which strategy is being used.
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