Price to sell or Pay the Price Later

Pricing your home properly is the single most important aspect of selling your home.  It is important to price your house to sell.   No amount of marketing in the world will sell an overpriced home. It is very important to know what the Fair Market Value (FMV) of your home is for that period of time.  Fair Market Value is dynamic and always moving. FMV of your home 4 years ago was much different than it is today.

Fair Market Value is the price agreed upon and in which the money and property exchanges hands between a buyer and seller. Fair market Value is a price in which the general buying public would be willing to pay. Both buyer and seller, must be willing and informed, to buy/sell the piece of real estate in a arms length transaction. A transaction where neither party is desperate to sell or buy, and where the property is given reasonable exposure to the open market.

Yes, there are cases where you find the perfect buyer who will overpay for a home. Those instances are rare, you need to price accordingly for the general market. Once you determine FMV of your home than it is time to work with your agent market your home at a price to sell.

“Pricing a home is an art and not a science”

You can ask three different realtors and get three different prices. Even worse you can ask three appraisers and get three different prices. When it comes to price to sell, use your head and look at the data for yourself, don’t run on emotion.

Do not hire an agent based on the indicated price for your home

Price to sell based on historical data

Many sellers make the mistake of hiring an agent based upon the highest price they receive for their property. Instead, you should hire an agent based on the accuracy of the data they show you, how well they present it and how they are going to market your home. Lastly, be comfortable with your agent, selling a home is a collaborative effort between a seller and their real estate agent.

The following is a summary of data you would see for comparables for your home. Notice how market times, price per square foot and actual asking price reduces from expired’s to actives to solds.  Their is a correlation. This actual data was pulled from the my local MLS comparing capes that have sold in a six month period with a similiar bathroom and bedroom count, similar square footage and similar vintage.

Price to Sell based on Historical Data


What does this data show us?

Expired’s: Unattainable Price. In a normal market 25-30% of the homes will expire on the market unsold. In today’s soft real estate market it can be up to 40-50%. The list price of these home represent a price that is unattainable in the market place. Notice that the average square foot price, asking price and days on market are the highest of all the categories.

For Sale or active: High end of Price For Sale. Prices are asking prices only, no final price has been determined. Some of these homes will sell, some will expire. For sale prices indicate the possible top end of the pricing range. Notice how the average square foot price, asking price and days on market represents the middle of the market.

Sold’s: Lower end of the Pricing Range. Sold’s are the actual sale price and represent the price range where you will most likely sell your home. Notice they also have the lowest averages of all the categories. In a down market you should price your home slightly below fair market value and sold represent the middle to high end of the range. In an appreciating market, sold represent the low end of the pricing range.

History of an Overpriced Listing in a Dynamic Market

Price to sell or pay the price later

Real estate values are constantly moving. It is very important to pay attention to house values and price to sell your house in a reasonable amount of time.

$400,000 a year ago could only be worth $380,000 today. It is very important to know the trend of values in your market, especially in a declining market. In a sellers market, where houses are selling like hotcakes and inventory is low, if you overprice your home, the market will quickly catch up with the overinflated price of the home. (Represented by the orange arrow in the graph)

In a buyer’s market, with declining home prices and tons of inventory, if you list your home at fair market value or overprice , even a little, the market continues to decline, as your homes list price becomes more and more over-inflated. (Represented by the blue arrow in the graph.)

Eventually, after your house has stagnated on the market, you have to underprice your home to generate interest in your home. A house sold in the first 60 days, will ultimately net you the highest price. Your price should generate competition among buyer’s. When their is competition, there is fear of losing something. Remamber, most buyers need to get emotionally invovled with a house before starting the process of buying a house.

The dangers of “Can’t We Just Try?”

Activity of a lIsting over a period of time Can’t we just try?” is a question that is always asked. The problem is you waste valuable time sitting on the market overpriced. Peak activity is in the first 3-7 weeks.

Think about it. The first showings will be from Real Estate Agents with their clients. These buyers have rejected every other house in the marketplace and are waiting for the next new house to come along. These initial buyers are tired and they have felt some pain. They may have lost offers because they have under bid, over a home inspection issue or a multitude of other reasons.

They are ready to buy and they are the buyers that will offer you the most for your house. They are the buyer’s that are most educated about the marketplace.

As your property sits on the market you’ve lost the attention of the best buyers. Now you get the buyers that are just entering the marketplace and the bargain shoppers. Less competition nets you less money.

This graph is a true representation of activity over the length of a listing. I see this pattern over and over again. The only way to change that cycle is a price reduction than the cycle may start over again…. if the price reduction was enough to regenerate interest.

Reasons Not to Price your Home to Sell

Unfortunately there is a plethora of reasons why a seller will not price their home properly for the current market conditions.  Here are some of the more popular reasons.  Not one of these will increase the value of your home.

Over Improvement – Improvements and upgrades should be made for enjoyment of the owner and not just resale. You cannot add an item to a home, based on personal taste, use it, then expect a buyer to pay the original cost.

Need- An owner’s need for money does not increase the value of the home. The fact that you may need the money does not mean a buyer will pay an overinflated price for the home.

Buying in a Higher Priced Area- Values are location specific. High values in the destination you intend to move to, do not increase the value of the your existing home. You made the choice to move, why must the buyer fund your move?

Your Original Purchase Price was High- You probably paid in the range of Fair Market Value when you purchased your property. The housing market is always moving up or down. As of 2009 we are back to prices we saw around 2003-2002. If you bought between 2005-2006 at the peak of the housing market, you have lost some equity in your home, much like many people.

Your List Price is Decided on Something Other than Factual data– Base your opinion of value on recent documented sale prices. Your list price should be based on sold information, not emotion or what your neighbor Bob thinks it is worth.

Bargaining Room– Buyers may offer low, but they will do that at ANY price. It is easier to negotiate up to fair market value than to an inflated price. I can’t stress how many times buyers walk away from a property that they like but feel they cannot negotiate Fair Market Value for the property. I am a licensed auctioneer and offer a hybrid auction for my sellers. Our start bid is usually around 30-50% below fair market value. Invariably, we get multiple offers/bidding and 90% of the time we sell the house in the range of fair market value. Competition creates a frenzy.

Move isn’t Necessary- Even if the move isn’t urgent, it is important to price correctly to preserve your marketing opportunities when and if the move becomes urgent.

An Offer that Falls Apart does not indicate Fair Market Value. An over priced property that is desirable can sometimes generate inflated offers. The problem is these offers are highly prone to buyer’s remorse and they pull out of the dea,l especially during the home inspection or insist on an inordinate amount of repairs.

Your Property is Competing for Buyers. Buyers today are not uninformed. They have seen multiple properties and generally viewed hundreds more on the internet. They have a good idea of what Fair Market Value is on a property. In a buyers market it is more important than ever to price properly due to climbing inventory.

There are the 3 P’s of seling your home. Pricing, Preparation and Presentation. If you do not get the pricing right, all the preperation and presentation in the world will not make a difference. Make sure you make an informed decision when choosing an agent and don’t get blinded by the agent who “buys your listing” (an agent that gives you a high number on your home to secure the contract, then beats you down on price?

Are you going to choose your agent on:

Indicated Market Price


The strength of an agents Marketing Plan

You or your real estate agent have no control over the real estate market. Th fair market value of your home is the fair market value of your home today. In a month it could be different. (in our area we have been losing approx. a half a percent a month, some of the small cities around us have been losing 1-2% a month). If you don’t get your home priced properly to begin with, it cost you money in the end.

Happy Selling!!


This post was provided by Kevin Vitali of EXIT Group One Real Estate In Tewksbury MA. You can contact Kevin by email at kevin@kevinvitali.com or call 978-360-0422.

I pride myself in the quality of my work while helping buyers and sellers make dreams come true.

Real Estate Services in northeast Massachusetts, around the Merrimack Valley including the towns of Andover, Billerica, Boxford, Chelmsford, Dracut, Georgetown, Groveland, Haverhill, Lawrence, Lowell, Merrimac, North Andover, Newbury, Newburyport, North Reading, Rowley, Tewksbury, Tyngsboro, Westford, Wilmington, West Newbury