HOW DO I PRICE MY PROPERTY?

There are generally three things that can happen with pricing a home:

1. Under-pricing

2. Pricing it "Right" or

3. Overpricing

With prices climbing up during most active seasons due to demand surpassing supply - traditionally spring and fall in dynamic markets like Boston and Greater Boston - sometimes there's a fine line between all three of these.

Always remember that pricing a property is an invitation to the marketplace. It's an opinion of value ultimately to be corrected upward or downward as the real market value will get defined through actual offers from qualified buyers.

Asking Price vs. Fair Market Value:

Asking price = Owner’s and Agent’s educated OPINION on what current market buyers are willing to pay for it.

Fair Market Value = Actual price buyers are willing to pay evidenced by concrete and qualified offers.

Below is a short version of pricing fundamentals overview and why overpricing makes less sense generally, unless a seller is not in the rush to sell, and maybe just looking to test the market rather than sell as efficiently as possible. 

Firstly, I would recommend requesting a comparative market analysis (CMA) and doing a detailed review of the current and recent prices of comparable properties in close proximity to yours. Your Realtor can create and review a CMA with you to help understand the competitive landscape and determine the appropriate sale price range.

To price your property “right”, I recommend the following steps:

• Review 3-9 months worth of market activity with your agent from several angles including:
  • Price per square foot range for Sold, Under Agreement and Active for sale properties comparable in age, size, condition and location

• Review "pricing pyramid" exhibit below to understand the basic psychology of the buyers' behavior
• I would also ask your Realtor to sign you up for MLS listings as if you were shopping for a houselike yours. Watching the market in the pre-listing launch period of say two weeks of going live on MLS should give you a great perspective on what else is available to buyers and how they're likely going to perceive the value of your property in the context of your competition. 

 

When someone is selling a renovated, move-in ready or even luxury property, sometimes they may think pricing it above their fair market value range should only bring "serious buyers" and give them a cushion to negotiate. The reality usually is that at 10%-15% above "fair market value range" you may hurt the urgency to visit the property and take action. Buyers will often say something like "let's wait till the price comes down", which is an awful strategy for buyers because as soon as the price does thereotically come down, they'll be competing with more buyers, but if they don't have a great advisor on their team, they sometimes miss this point.

If it's a very unique, ultra luxury property with great marketing, including beautiful photos & video, 3D walkthrough, personalized website etc, it may attract virtual high net worth individuals from out-of-state or even foreign buyers, but that's a relatively tiny segment of the real estate market.

As a general rule of thumb, we want to build anticipation and create a sense of urgency for maximum exposure as soon as possible when the property goes live on MLS to gauge true current demand at this price point. Even very financially comfortable buyers are often not interested in "overpaying", so pricing your property attractively, i.e. at or slightly below market value, will:

• compel majority of potential buyers to rush to see it and take action
  
• minimize price objections
  
• let buyers recognize value in the context of other available properties and understand they will probably need to compete for it and take action asap
  

 

If buyers see better or similar options for lower prices than your asking price, they'll deduce that your property is possibly overpriced. They may also get concerned appraisal may not come at the asking price, which may cause an issue for most buyers who would be financing their purchase. If, on the other hand, buyers see a fair price and recognize good value, they're more likely to make an offer in a multi-offer situation and be willing to step up well asking price to get the property they like.

All this applies to properties in every price niche, but it's most frequently luxury properties that may seem overpriced as they spend more time on the market waiting for the right buyer. This is something luxury home sellers are often prepared for and it’s not necessarily a big issue, but if there's an urgency to sell, choosing the “right” price and marketing approach, including a strong pre-launch, will play a key role in how quickly the house attracts its new owner.

Pricing a property is a bit of an art form - a mix of financial analysis, common sense and intuition, but ultimately the so-called pricing formula’s main components are:

LOCATION + SIZE + CONDITION + FEATURES (Tangible & Intangible)

 

Let me know if you’d like to discuss your home’s value and feel free to sign up for a monthly What Your Home Is Worth report.