Nicole Mazzola

858.775.0328
nicole@aare.org

1020 Prospect Street #350
La Jolla, CA 92037

Strategies For Pricing a Home in a Hot Seller’s Market

October 1, 2018

If there’s ever an ideal time to list a home for sale, it’s during a seller’s market.

In this type of market, demand is very high, while inventory remains relatively tight. It’s this type of environment that can send sale prices through the roof.

When it comes to actually choosing a specific listing price, many sellers might automatically want to list as high as they can go. But while sellers can definitely command a higher price, that doesn’t necessarily mean they can just arbitrarily choose any number.

At the same time, other sellers might want to pick a different strategy and price slightly below market value in an effort to spark a bidding war and wind up with a price that’s much higher than what they would have gotten by pricing at market value.

Then, of course, there’s always the option to list at market value.

So, what strategy should you go with when establishing a listing price if you’re in the middle of a sizzling seller’s market?

Price High

As mentioned earlier, listing at a high price is a pretty common desire among sellers when they’re immersed in a seller’s market. Given the high competition among buyers and the relatively low competition among sellers, it would stand to reason that sellers can command higher prices in this type of environment.

But how much you price your home over the actual market value makes a difference. Going about 5% over market value may be OK, but any higher than that can make it a little more difficult to sell unless your home is extremely desirable among buyers.

If you overshoot your listing price, you run the risk of making your home sit on the market for longer than the average home takes to sell. The longer your home sits on the market, the more of a stigma will be attached to it. Buyers will assume there’s a problem with your home if it hasn’t been able to sell within the average time frame that other similar properties have sold in.

At some point, you may have to reduce your listing price just to bring more attention back to your property. And reducing the price is never fun.

You will also have to take into consideration the possibility that buyers’ lenders may not approve mortgages for more than what homes are appraised for. So if you actually sell your home for more than it’s actual market value, there’s always that chance that the buyer’s lender won’t agree to loan all that money.

If you decide to list just slightly over the market value at about 5% or so, be prepared for your home to take a little bit longer to sell than others in the area that are priced at market value. If you are not in a rush to sell, you might consider using this strategy to see if you get any bites.

Price Slightly Under Market Value

A common strategy that sellers use to drive up the price of their homes is to list just under market value in an effort to stimulate a multiple offer situation. In a seller’s market, bidding wars are rather common and end up being very successful for sellers when it comes to walking away with a high sale price.

When buyers see a low price, they’re naturally attracted to it. And as more buyers put in their offers on your home, the more options you have to choose from. But that doesn’t necessarily mean that a bidding war will automatically translate into a higher sale price.

It all depends on how fierce the competition is and how badly buyers want your home. If they want it badly enough, they’ll be more willing to beef up their offers to make sure they come out the winner. And this often means the seller comes out the winner too in terms of how high the sale price can go.

This strategy is usually successful when selling in a seller’s market. That said, it’s always important for sellers to be prepared for the strategy not to work. There’s always the chance that only one offer will come in at, which eliminates the bidding war that would help to drive the price up.

Price at Market Value

The safest and soundest pricing strategy is to price your home at market value. No matter what type of market it happens to be right now, pricing your home at market value is the safest way to ensure that you sell your home within a reasonable amount of time and at a price point you can be happy with.

To determine what this value is, it’s important to look at similar homes in the area that have recently sold. The more recent the sale, the more accurate the comparison will be.

Your real estate agent will be able to pull a report that lists all the comparables in the neighborhood that have recently sold so you can narrow down what your home is truly worth according to today’s market conditions. What it may have been worth six months ago might not necessarily be an accurate reflection of what your home is worth today.

Regardless of what type of market you happen to be in, assessing market value is a step that should always be taken.

The Bottom Line

A seller’s market definitely puts sellers in the driver’s seat. With fewer homes on the market and plenty of buyers on the prowl, sellers typically have an easier time selling. But sound pricing practices still apply, regardless of what type of market it happens to be. Pricing right is one of the most important components of selling successfully, so be sure to take the time to establish the right listing price in order to ensure the outcome you want.