Why Doesn't Someone Just Make An Offer?

A recent blog post included some of the reasons that home sellers do themselves a disservice by pricing their home too high from the onset. Today we answer a question that is asked by many who are puzzled by the fact that their home hasn’t received even a “low ball” offer. “Why hasn’t someone at least made an offer?” thinks the frustrated home seller.

The graphic below will be our focal point for understand the answer to this question.

The National Association of Realtors has determined that most buyers will eventually spend in the area of 5 percent more than what they initially plan on spending. They begin by looking in a certain price range, don’t find what they want and then bump their price upwards. (The same is true when purchasing a car, clothing and I suppose nearly everything else.)

The consequence of pricing a home too far above market value is illustrated above. The buyer who views this home will be comparing it to homes of greater value. Those buyers, who eventually spend 5 percent more than the homes at which they initially looked, will typically not even bother to see a home that’s priced dramatically higher than their initial price range.

Thus, when a seller complains that, “The wrong buyers are seeing my home,” they’re correct. Not, however, the wrong profile of buyer. In actuality, it’s the wrong buyer in the sense that the home needs to be viewed by someone who will meet the homeowner’s price. That’s the benefit of pricing a home right at or just slightly above what appears to be market value based on all the data – to capture that buyer who will eventually spend 5% more.

More Drawbacks

In addition to attracting the wrong buyers, the wrong price has other drawbacks:

• The home will likely not appear on the buyers’ radar if it’s much higher than the 5% differential.
• The home may serve as a catalyst to sell other homes that offer more value.

The net, net is that in order to procure the most money, the prudent home seller prices their home just below what the data indicates it will sell for in an effort to attract the most buyers, drive the price upward and avoid a lengthy market time which results in a below market sale.

Written by Al N. Filippone. For more information about the local real estate market, call our Darien office at 203.655.5358 or visit our website at afahomes.com.