Pros and cons of pricing home under market

Are you prepared to accept a low bid?

By Inman News Feed
Add Comment Add Comment | Comments: 1 | Posted Jan. 23, 2012

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Are you prepared to accept a low bid?

Dian Hymer
Inman News®

Don't jump to conclusions when you hear that a listing sold for more than the asking price. You need more information. Are prices are heading up in your area, or did the sellers intentionally price low to stimulate multiple offers?

There was good news about the housing market recently. In October, pending sales rose 9.2 percent from the same month a year earlier, according to the National Association of Realtors. Pending sales are a leading indicator, and the index is a measure of homebuying interest.

Unlike recorded home sales, a certain number of pending sales don't close. Even so, this is a positive sign in the midst of a volatile market.

In some areas where job growth is strong and there aren't many homes for sale, home prices are starting to rise. But at this point, these areas represent a small part of the overall housing market.

Unless you're selling in a high-demand, low-inventory market, it's risky to list your home under market value. Some sellers use this strategy to increase their chance of multiple offers and a quick sale for over the asking price.

This strategy could backfire if you are priced low and receive only one offer for the asking price or less. It's difficult to negotiate buyers up on price when they're not in competition with another buyer.

On the other hand, if you know there is strong demand for a home like yours, pricing on the low side could generate enough action to get your home sold at or over the list price. But you shouldn't price lower than a price you'd be willing to accept if you receive only one offer.

HOUSE HUNTING TIP: Sellers should have a good understanding of the pricing dynamics currently operating in their neighborhood before they select a list price for their home. Are listings sitting on the market for months or are they selling quickly? Are certain locations or price ranges more active than others? How does your home compare to those that sold recently? Pricing right for the market is critical to selling in today's market.

Like sellers, buyers should become price experts on the areas where they would like to buy. The Internet makes this chore a lot easier. But you'll get a better feel for valuation if you see homes that would satisfy your housing needs in person.

Don't focus on list prices. Sellers often make the mistake of listing for more than their neighbor's second-rate home. However, if the neighbor's home is priced too high, this isn't a good benchmark. Also, consider that the reasons you think your home is better may not be in sync with the way a buyer may view your home.

It's difficult for buyers and sellers to be objective about buying and selling homes. Most sellers have strong attachments to their home and have a hard time divorcing themselves from it emotionally. This can cause them to reject a good offer and later regret the decision.

Buyers can be so objective that they find it impossible to buy a house. The perfect house does not exist. Neither does the perfect deal. Compromises need to be made, but with full understanding of the pros and cons. In other words, you should make rational decisions about the price you pay and what you're willing to live with.

Knowledge of local pricing is essential for buyers in market niches that are hot compared to the rest of the market. Be sure to find out the sale price of homes that you've seen and liked or bid on and lost.

THE CLOSING: This way you'll be in a better position to have a shot at winning in competition the next time.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

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1. Oliver Finney said... on Feb 28, 2013 at 07:55PM

“Truly, home buyers have become much clever these days with all the information and helpful tips they could get online. In Australia, buyers may find www.myrp.com.au very helpful especially when verifying the most recent property reports.”

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