August 05, 2010

Pricing Strategy for Today's Real Estate Market

Pricing, especially in today's general real estate market, is important.  Agents tell sellers (correctly) that pricing it too high means that there will be NO offers on the home, not just that it will take longer.  Sellers are usually fearful of pricing "too low."  There's no such thing really, but that's another blog post.
Yes, in today's market, correctly pricing a home is very, very important.  Yet, I've seen over and over again so many agents who got the price in the right ballpark yet they're still not getting any offers and very little showings.
Well, if it's priced right and that's the most important thing, then what gives?!
In short, it's missing the price points.  Price points are more than just getting a property in the right price range.  Price points are about helping the buyer find the property in the pricing range THEY are looking.
Why these price points are being missed by so many is because most agents are still using what I'll call the "Wal-mart Pricing Strategy."  This pricing strategy is where you list just under your price.  Example: $199,900 for a $200,000 house.  Seem familiar? Just like the "It's only 99 cents!" approach.
This is the old standard used by agents from the dawn of time, I think and carried on by their younger brethren because they were trained to price houses this way.
Why is this a big deal, you ask?
Simple, this price strategy does not take into account the Internet or the consumers ability to now do online searches without the benefit of an agent.
In the old days, you, as a buyer, would call up an agent and say, "I'm looking to buy a house in the $200 to 225,000 price range."  The agent would run the search and, usually, search for $190-235K houses.  Hit a little lower and a little higher than the range in order to get ALL the best possible matches.
NOW, however, the consumer can search directly for homes via the Net.  Most of the major home search websites such as Zillow, Trulia and have went to an input block for price ranges, but several others, including most agent/MLS driven searches use the dropdown boxes.  If you've got one, take a look at it.  See how it has specific price points?  Most use the $25k increments.  Some $10K.
Whether it's dropdown boxes or input, the consumer rarely runs searches like an agent would.  If they're looking for $200-225K homes, that's what they'll input into the search.
So, back to the point, why is this a big deal?  Okay, let's look at your $199,900 priced house again.
If someone ran a search for $175K to $200K homes, you come up, but you're on the high end.  You're going to have to have a top-notched show-ready home to compete, in most cases.  You're goal should be to be the best, and one of the cheapest, on the $200K-225K home searches.
BUT WAIT!  You don't come up on any of those searches!  You're $100 too low to show up.  Dang it!
That's why it's important to not only price your property well, but set it at the correct price point, too.


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