Not too hot.
Not too cold.
Pricing your house to sell is a Goldilocks moment: ask too much, and your house will be eliminated nearly as soon as buyers see the listing. Ask too little, and you won’t capture a fair return. Like the fairy tale’s perfect porridge, you are looking for the just-right price that will attract buyers, resonate as reasonable, and deliver the return you want.
One way to think about pricing is to consider time-on-market as money, says Ryan Gehris, broker of record for USRealty.com.
In his experience helping thousands of owners sell through USRealty.com, overpricing is the number one mistake that sellers make. The more overpriced the house, the longer it takes to sell – and that sale will only come after the price is brought into line with market norms, he says. (Get pricing tips at the USRealty.com sellers’ resource center.)
Of course, as the house sits on the market, its appeal fades. Buyers and buyers’ agents want to see what’s new – and don’t want to get entangled in painful negotiations that start way too high.
Gehris’ insight is in line with findings by Robert J. Shiller, professor of economics at Yale University. (He’s the Shiller of the Case-Shiller Index that tracks changes in home prices in 20 markets around the country, and is used by investors.) Research he conducted in the mid-2000s found that even in a period of runaway increases in home prices, individual homeowners still thought that their houses were worth more than their local markets indicated.
Shiller found that individual homeowners valued their houses based on the hope that, somehow, their houses would be the exception to the local market trend. If the local market was appreciating, homeowners tend to think that their houses will appreciate faster. If the local market was declining in value, homeowners thought that the value of their houses would still hold steady.
And other researchers have found that when homeowners are determined to not lose money, they price their homes unrealistically – as much as 25% to 35% above the market norm. They don’t get those prices – and that realization only comes after the properties don’t sell.
Asking a bit more than the norm for your neighborhood is a lose-lose: chances are good that you will have to lower your price, and when you do, you’ve lost the advantage of being fresh on the market. And if you do hold out for a higher price, you pay the cost of not being able to move forward with your search for your next home, and other missed opportunities.