His real estate agent recommended a $345,000 price tag for his Chicago townhouse, and Daniel Penzing reacted angrily to the figure.
Penzing explains, “We informed our realtor that we wanted to offer our unit at a price that was 5% more than what he proposed.” “I had a feeling the market was going to heat up.”
The property was instead listed for $379,900 by Daniel and Natalia, who went with their instincts. It sold for $375,000 in less than a week, which was $30K higher than their agent had suggested and certainly enough to pay his 2% charge.
In the words of Penzing, an investor and principal editor of the personal finance website Maze of our Lives, “the one line said to our agent very well compensated for all his services.”
Even the Penzings have a good feeling about things these days. According to a recent Realtor.com poll, 94% of sellers anticipate selling their houses for more money than they bought. I’m going to overvalue their home when they put it on the market.
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Given the housing market’s current state, this comes as no surprise.
A new record was set in May when the average house price surpassed $350,000 for the first time in the United States. According to the National Association of Realtors, that’s up 23.6 percent from a year ago and the 111th consecutive month of year-over-year improvements. It may represent a sizable profit for newlyweds and a strong desire to get rid of it.
Prices higher than what his agent recommended succeeded in Penzing’s situation, but this does not mean overpricing is always (or even typically) the right tactic. In May, sales of homes also dropped for the fourth straight month as purchasers were priced out or opted to wait until the market cools.
“According to New York City Compass realtor Phillip Salem, “sellers have tunnel vision when they start hearing how hot the market is.”. Their property is the most sought-after in the neighborhood, according to them.”
Prices that “make me move.”
FOMO is causing some homeowners to put their houses on the market to see if anybody is interested. Last month, John Burns Real Estate Consulting Director of Research Rick Palacios tweets that “a lot of aspirational’make me move’ pricing.”
As a result, there has been an uptick in demand for homes in the suburbs and rural areas around major cities.
According to Palacios, who now works in the industry, many homeowners in secondary and tertiary markets had no idea that their demand might rise by 20% to 30% in a year. “It’s possible that homeowners in these areas understand that the moment is right to offer their properties at a high price given the influx of new money from outside the area.”
This is a beautiful example from Boise, Idaho. Compared to the previous year, property prices have increased by 36% on the market. Price increases in Bend, Oregon, have reached a whopping 32%.
However, this strategy isn’t limited to a few places. Homeowners all around the country are taking advantage of the low inventory and rising demand for real estate.
According to First American, just 115 out of every 10,000 properties were for sale this spring, the lowest percentage on record and a 50% drop from last year’s numbers. The lack of inventory is causing properties to sell 35 days quicker than they did a year ago. Researchers estimate that the housing market needs around 7 million more dwellings to keep up with demand.
Because of the tight supply and strong demand in the housing market, Realtor.com chief economist Danielle Hale believes that sellers are in control. When people do this, they’re listing their houses for a higher price than they think they’re worth.
“Many individuals are shooting for the stars,” says Dennis Bowers, a real estate agent in Naples, Florida. Almost every merchant will try to overcharge you. There is always room for negotiation, even when selling for a record price.
Overcharging has its drawbacks and hazards.
When their clients’ high aspirations pay off, agents confess.
This approach is mostly ineffective. Agent Kevin Sneddon facilitated a listing in Darien, Connecticut. Sneddon hoped to put the beachfront home at $12.9 million. They requested $14.9 million in payment.
Sneddon claims, “I promised to advertise the home for 30 days at the seller’s aspirational price.”. We received an accepted offer in less than a month after I decreased the price to my suggested price on day 30.
Reduced pricing — such in this case—can ultimately help sell the property, but some brokers believe the harm has already been done.
This is because purchasers typically fear something is amiss with a house while it remains on the market for an extended period. To alleviate these worries, numerous price reductions are required simultaneously.
Real estate analytics business UrbanDigs co-founder Noah Rosenblatt argues, “Sellers think they will have to bargain anyhow, so why not start high and come down to their price?” Due to the longer days on the market and the higher discounts relative to the price at the market, this approach is not recommended.
You may sell it for the highest possible price without overpricing your house.
In many cases, the best strategy is to establish a fair price and let the market take care of the rest. According to Redfin, over 70% of buyers were involved in a bidding battle in April and May. And what about the other half? They went for more than their asking price.
Lindsay Barrett, a certified associate real estate broker at Douglas Elliman, believes that in a market like this, “it’s so much better to price where it’s worth and let the market go from there,” she adds. The outcome may be much superior.
So how much do you think your house is worth? There are several variables to consider, including the local market and demand for your home. Analyzing recent sales data in your neighborhood can give you an idea of how much demand there is for a property with your specifications. A well-tuned agent may also be of assistance.
Hire an agent that won’t try to overcharge you, says Salem, but instead provides evidence that proves the amount they’re proposing is reasonable. “We’re out there every day..” Photos on the internet are one thing, but seeing a property in person and seeing all the little nuances that make or break a sale is another.”
How to test higher pricing in a clever way
What if you’re not sure?
A coming-soon listing, also known as a pocket listing, is an alternative for people who wish to check out high pricing. With these services, you may attempt to sell your house without putting it up on the MLS, Zillow, or other public listing sites. In this case, your real estate agent acts as an intermediary between you and other agents and buyers, creating a private buyer network for you.
An agent from Chicago’s Baird & Warner claims the private network is now “just as hot as the main network.” “The nicest part about the private market is that you may remain there for as long as you need to. If you want to test the waters or generate momentum before your listing goes public, this is a terrific way to do it.”
As Sneddon’s last piece of advice for his clients, be sure to establish a deadline for decreasing the price before going public with it.
It’s OK to set an ambitious price if you’re serious about selling, but if you don’t receive an offer in the first two weeks, you’ll need to lower the cost,” Bowers advises. Homes that have been on the market for a more extended period have a red flag on them, suggesting something is wrong. It’s OK to try it for a short time.