The risk of overpricing your Austin home
A person’s home is often their most valuable asset. Given that, most people want to sell their Austin home for the highest amount in order to maximize their profit. To reach that goal it is tempting to ask for an inflated price. After all, if you don’t ask for it, you won’t get it, right? Yet overpricing your house comes with risks. Consider these insider tips as you think about pricing your Austin home to sell.
Hear us chat about our tips for pricing your home on our latest episode of Calls with Paul:
Finding the right price
As the seller you ultimately decide what sales price to ask for your home. Remember, however, that pricing your home to sell is both an art and a science that requires an artful balance of selling for the highest price while still attracting potential buyers. Rather than pulling a number out of the air, seek out the professional advice of a Realtor who has experience with all aspects of Central Austin’s real estate cycle, who is familiar with market fluctuations, and has the skill to guide you through the pricing analysis.
A Realtor can give you realistic perspective and insight on factors that can have a direct impact on the final sales price of your home. Pricing should take into account:
- The seasonality of the current Austin real estate market,
- The position of the overall historic sales cycle,
- Comparable sales of similar homes in your neighborhood, and
- The unique location, condition, and features of your home.
A home is most attractive to potential buyers when it is new to the market, so it is essential that you price it right from the beginning. Getting the price right creates a sense of urgency that buyers must act now or risk losing the home to someone else.
A word of caution about relying on price per foot
Many home sellers focus on the average price per foot of homes selling in their neighborhood. However, price per foot is only one of several indicators that factor into developing a pricing strategy to sell your home. Today’s buyer isn’t looking at just one neighborhood or one isolated area. Therefore, you need to factor your home into the big picture of the Austin market as a whole. In Central Austin in particular, the desirability of the neighborhood, value of the lot, and quality of the home can start to blur. Don’t rely to heavily on price per foot.
Three pricing strategies
There are 3 basic pricing models to consider, each with their own set of pros and cons.
Option 1: Go for it price
The go for it price is a little higher than the current market average. Because the price is higher than most other comparable homes, this option suits sellers that don’t necessarily have to sell.
But remember that many buyers won't even bother looking at a home that is priced sky-high, and that makes this choice risky. If you price your home too high at the beginning, you will miss a crucial opportunity to attract buyers. House hunters may overlook your property because it’s not in the price bracket they are searching in. Even if you lower the price later, some buyers will remember they dismissed your home initially and not give it a second look. A home loses its appeal the longer it is for sale, and as a result, sellers tend to make less money the longer a home sits on the market.
Option 2: Market price
With the market price, a home is priced in line with the market like everyone else. It’s a safer option since there is greater certainty the home will sell. On the other hand, this means your home is unlikely to stand out from the pack, which can mean a buyer may not be motivated to buy it out of fear of losing the deal. As a starting point begin by finding out what your home is actually worth with our free home valuation here.
Option 3: Feeding frenzy
In our experience, sellers have the greatest success when they create a feeding frenzy by pricing their home slightly below market. This often generates a bidding war or multiple offer situation where buyers let their excitement and fear of loss drive their purchase, often bidding above the sales price.
The equation is simple. A lower starting price = more excitement about your home. And more excitement often translates into more and better offers.
In fact, the lower price gets people excited about the possibility of scoring a great deal. It's that low-price-seeking excitement that causes more buyers to show up and view your home than if you had started at a higher price point. In turn, that creates competition that often increases the price that buyers are willing to pay.
Since the idea is to create urgency and competition, it is important to have a pre-determined plan for handling multiple offers. An experienced real estate agent can help you manage this to your advantage while keeping the drama from the potential buyers to a minimum.
Choosing a strategy
Which strategy is right for you? Depending on current market conditions and the time of year, there is usually a 10-20% difference between the “go for it” price and the “feeding frenzy” price. After selling real estate in Central Austin for over 25 years, we’ve found that most of our clients choose either the market price or the go for it price. However, the feeding frenzy strategy is likely to result in a quicker sale and more profit at the end. Whichever model you choose, be sure to have a well-thought out backup plan that accounts for possible changes in the market.
Be prepared to adjust
So what happens if your home doesn’t get an offer right away? Our best advice is to be prepared to adjust your price quickly. Many sellers want to wait it out, but the longer you wait the more shopworn your home becomes shopworn and the “fear of missing out” fades.
One of the best ways to gauge your price is to look at the volume of your showing traffic. The data tells us that most showings happen in the first four days a home is on the market. If you had no showings or very few showings, your home is likely priced way too high. If you have numerous showings but no offers, then you are likely priced a little high. Either way, it is time to make a price adjustment.
As you consider your price reduction, keep in mind that you’ll get further with a large reduction than you will with tiny, incremental reductions. You might also attract more buyers -- and ultimately more money -- by taking your price reduction slightly below a common pricing band. For example, you may draw more buyers with a price reduction from $799,000 to $774,000 than you would changing the price from $799,000 to $779,000 because some buyers may be cutting their search off at $775,000. A price cut below that point will expose your home to a whole new group of prospects.
Our goal is to take the mystery out of real estate.
We hope these secrets to pricing your Central Austin home did just that. If you’re considering selling your Austin house, please reach out to schedule a free, no obligation consultation with us. We’d be happy to clearly explain the steps and strategy to help get your Austin home sold.
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