If you want to get the best price for your home, should you:
A. Ask for more than you think it’s worth?
B. Ask for exactly what you think it’s worth?
C. Ask for less and count on a bidding war to push you over the top?
That's the question posed by a recent Toronto Star article.
The article points to a 2013 study in the Journal of Economic Behaviour & Organization that says the correct answer is option "A" - overpricing is often the best strategy for achieving the highest sale price.
Of course, that article goes on to say that, "pricing high pays off in an extremely modest way, a boost of about $100 to $200 on average over similar homes."
Seriously? A benefit of a mere $100 to $200?
Is that a typo? Did they forget to add another zero (or two) to those numbers?
I can tell you right now that overpricing generally leads to more days on the market. Often many more days on the market.
Is the chance at a few hundred bucks really worth having to live through more showings, more open houses, low-ball offers, etc?
Isn't a better strategy to list closer to market value and sell quickly and for top dollar (relative to list price)?
Some might say that it really depends on how much "overpriced" we're talking about.
Let's say the current market value of the property is $500,000. Listing at $509,000 is certainly a different story than listing at $529,000.
In other words, one could argue that there are degrees of overpricing.
Others might say that a property is either overpriced or it's not.
Either way, there are two important things to consider when contemplating overpricing your property:
- How long do you want the selling process to take?
- Do you want to run the risk of eventually having to reduce the list price and then end up selling for less than you would have if you'd listed closer to market value in the first place?
Below is the Toronto Star article in full. Enjoy!
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How Best To Set Your Home's Selling Price?
by: Toronto Star Wire Services, Published on Fri Nov 8 2013
If you want to get the best price for your home, should you:
A. Ask for more than you think it’s worth?
B. Ask for exactly what you think it’s worth?
C. Ask for less and count on a bidding war to push you over the top?
A study in the Journal of Economic Behavior & Organization this year argues that the answer—despite what you’ve probably heard—is A: overprice.
They suggest that pricing high pays off in an extremely modest way, a boost of about $100 to $200 on average over similar homes. Underpricing in the hope of setting off a bidding war, the study says, nets average sellers a bit less than they otherwise would have received.
“The main takeaway for sellers is to not buy into the story that you will make more money if you under price,” said study co-author Julia A. Minson, an assistant professor of public policy at Harvard University’s Kennedy School of Government.
Whether overpricing is a smart strategy—as opposed to right-on-the-nose pricing—might depend on how quickly you want to sell.
If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.