Selling Your Home? Think Like a Marketing Expert

Selling

This is the fourth post in a five-part series about getting ready to sell your home.

Today I’m going to address one of the biggest misconceptions sellers have about selling their home. The asking price. This is the price at which you list your home. I have seen many sellers tell their agents that they won’t accept a dollar less than $X price. And that’s fine, a seller can absolutely do that. They don’t have to accept anything they don’t want to accept. But if you want to set the asking price of your home at a certain dollar amount, you must know that that price has nothing to do with what kind of offers you are going to get. Remember, we live in a capitalist society. The market determines what the buyers are willing to pay. Not you.

Here is something for you to consider. Did you know that 95% of buyers will consider your home if it is priced at the current market value? Price your home 5% over market value and the pool of potential buyers who will consider your home drops to 50%. Price it even higher and the pool drops further.

Pricing Pyramid

Now, to put this thinking into context, imagine Buyer Mork and Buyer Mindy. Let’s use them to represent the larger pool of potential buyers for your home. Buyer Mork is a first-time home buyer, two years out of college. He’s got a little bit of student loan debt, an entry level salary, and uncertainty about where his next move up the career ladder will take him. Buyer Mindy is a seasoned real estate investor who lives in New York City, owns a home in Santa Fe and in Malibu, and now wants to own another vacation home in Boulder, Colorado. Buyer Mork is cautious and Buyer Mindy is very busy and savvy about real estate investments.

As Buyer Mork and Buyer Mindy start their real estate search on-line, as do 85% of all buyers, whenever they come across an over priced home, they both mentally pass it on by. With an overpriced home, Buyer Mork is too cautious to even book a showing. He thinks about his debt and low salary and determines the home isn’t worth his time. He’d rather have a reasonable mortgage payment and still be able to take a vacation once he accrues enough vacation days at work. Buyer Mindy sees the overpriced home and determines that she is too busy to bother with unreasonable sellers. If they are unreasonable about price, what else might they be unreasonable about while the house is under contract, she wonders? Buyer Mindy is a savvy investor who knows that she can still enjoy brunch on Pearl St whether she buys a home on Spruce and 20th or Spruce and 17th.

As you think about the thought processes of Buyer Mork and Buyer Mindy, imagine applying this to the thousands of buyers who might consider purchasing your home. A realistic list price gets people in the door. An unrealistic price keeps them out. Your price, in effect, is probably the most important piece of marketing you and your real estate agent can implement for your home. Once a reasonable price gets people in the door, your staging can then get buyers into fantasy mode about the wonderful lives they will lead if only they buy your home. Once buyers get caught up in fantasy mode, their heart takes over and they are more likely to make an offer and start playing ball (i.e., committing to finding a way to make the mortgage payments work). Even savvy Buyer Mindy may be willing to rationalize the cost due to a strong and rapidly appreciating housing market in Boulder.

For a real-life example, let me tell you about a house that I recently sold in Arvada. Luckily, I was able to work with sellers who really understood that the list price was a marketing tool for their home. After I toured multiple homes in the area to thoroughly understand what was their competition at that moment in time, we chose a list price that was $5,000 less than the list prices of their competition. As soon as their home hit the MLS, they were flooded with showings and we had a jam-packed weekend of open houses. While their house wasn’t terribly unique and still consisted of basic builder materials (it had been a rental for several years), the price got people in the door and my staging was just enough to make the formerly empty home feel welcoming. The price seemed to act like a placebo as literally dozens of buyers commented on how much they loved the home and wanted to live there. Eventually, the house sold for $40,000 over asking and both the buyers and sellers felt that they walked away with a great deal.

So, remember, selling your home is a multi-faceted effort. Pricing your home at a realistic market value is imperative to getting as many buyers as possible through the door, receiving multiple offers, and, hopefully, having an ensuing bidding war. You can still accept or reject any offers you want, and you can even counteroffer to try and get a better price. But the list price is not about you and your financial preferences. The asking price is your most important piece of marketing and it’s about speaking to the realities of the market so that buyers will sit up and take notice of your home.