5 good reasons to raise your list price
I often tell my buyer clients when making an offer that one of three things can happen.
The sellers will:
- Accept the offer
- Reject the offer
- Sign back the offer (counteroffer)
What we don’t expect is that the seller will sign back the offer at a higher than original list price. But anything can happen in real estate and that’s exactly what happen in a case I was working on last year – and the buyers accepted the sign back at a new higher than list price.
The price is the price
Pricing is the most important thing about listing your home and often the hardest. It is because that there are so many factors to getting the price right, so many moving parts in the real estate market. There are things we know and things we don’t, things we can control and manage and things we can’t.
In Waterloo Region we tend to be pretty conservative. The price is the price. Except for last year when the old rule book went out the window, we expect that homes will sell for near list price — historically within an average of 3% high or low of list price.
Finally, we don’t want to price too high. Most serious buyers have seen enough homes to easily spot an overpriced listing. Price reductions stigmatize the listing (and the Realtor’s credibility) and leads to a lower than you would have gotten if you had of priced right price.
The counter-intuitiveness to good pricing theory
With all that in mind, it sounds a little counterintuitive to say this but in some cases it actually makes sense to raise your listing price after listing.
Here they are:
Market conditions have changed
The real estate market is always changing. As mentioned above, there are a lot of factors, a lot of moving parts. Although we have really good statistics at the local board level, we are always looking back to predict what will happen next. The past is a pretty good predictor of the future, but it is not the be all and end all.
Sometimes the market changes overnight. We’ve seen this happen a few times over the last two years (notably last winter and spring) and we are never completely ready for it. When the market changes overnight, you should change with it – even if this mean raising your price.
You are in the wrong bracket
People shop in price brackets. Serious shoppers often have a $50,000 or even a $20,000 price bracket that they are shopping in. That means that if they are shopping in a $450,000-$500,000 bracket but your home is listed at $449,900, they might not be seeing it. Raising your price might actually put you in front of new and/or better buyers.
The stigma of a low price
I have a friend who sells used cars. He told me a story about a car sitting on his lot at $1,500.00. It sat and sat and no one bought it. So he raised the price to $2,500.00 and it sold right away. If the price is too low, he argues, people think there is something wrong with it and dismiss it.
New listings at higher prices
When determining list price, Realtors use recent comparable sales of similar homes as well as what is currently for sale similar to the target house. In a competitive market, new listings, as they come onto the market, may undervalue your home. If your home has better upgrades or some other obvious feature over similar priced listings, then you would be justified in raising your price.
Of course, if you really want to sell, then the addition of an inferior home at the same price as yours will mean your should sell first.
Upgrades after listing
Buyers are very discerning. Many want move in ready homes. Sellers, by contrast, have lived in their homes sometimes for a long time and do not know that styles have changed. Some sellers learn after they list that work needs to be done to appeal to more and better buyers. If a home seller upgrades and renovates after listing, then a price increase may be justified.
Market price is what a buyer is prepared to pay for a home. Unfortunately we never know true market value until the offer is made, an agreement is formed and the transaction is complete.