You would think it would be accepting an offer but it’s not. The hardest decision the seller makes is choosing the listing price.
Most seller’s pay attention to their neighborhood, especially as they get closer to listing their home. So they get a number in their head. Then they talk to friends and probably a couple of Realtors. By that point they have several numbers bouncing around their head. They have their own price which is sprinkled with memories and the work they put in to the home. The other numbers are from disinterested people who won’t buy the house but give opinions and from Realtors sifting past data to guess future results. And it is amazing to see how far a part agents can be on pricing.
Every seller goes through this battle with those numbers. They look at the top number and wonder “What if”? And once they have that number in their head, any drop often feels like a monetary loss. Unfortunately it can take a while before the seller really grasps whether or not the price is too high even though the Realtor knows pretty quick. The biggest problem is that homes get the largest amount of views the first week, price drops later may not be viewed by as many. Sometimes those buyers recognize the home while looking online and think, “I can’t remember why I passed on this home but I did,” and they never look at it again.
There was a study (I should have bookmarked it) that said pricing your home right in the beginning end up selling for more than notching down the price over time. Each home is unique, I’m not sure how they proved that. But in a seemingly opposing view, the authors of Freakonomics claim Realtors sell their homes for 3% more because their homes stay on the market 10 days longer than the average. Supposedly they sit and wait longer. I don’t know if there are enough Realtors to be able to make that claim. Plus, our clients don’t always make all of the changes we ask for whereas we are likely to make those changes.
So if you have two studies competing against lowering the price and holding out, you can see why this is the toughest decision. And one of the scariest things is when we finally get the client down to our price and it sells the first day. They are adamant they lost money and they are not happy. “I knew I should have started higher!” I had one seller that tried listing $10,000 above my price in 2003 which was a stable year and I could pinpoint prices. He got an offer the first week and told me, “I told you so.” Unfortunately only the husband half of the buyers saw the house. When the wife saw it they immediately backed out. My client said, “No problem, we’ll get another offer.” We did…three months later. We got 5 offers in a span of 60 hours and they were all around my price, and there was no arguing with that.
It is a hard decision with no easy answer in this soft market. Back in 2003 it was easy to pinpoint a price but now I give prices in ranges. The best answer I can give sellers in a tough spot is not to hang on too long. I’m seeing enough situations with multiple offers that if a good home is underpriced, the market will correct it.
Of course in this new economy it is tougher because people are coming up against a loss which leads to a short sale. It’s almost a luxury these days for a seller to have room to adjust their price.