When troubleshooting a sale, the first step is to understand your “levers.” Levers are the things that you can change. One important lever that is overlooked is the listing price.
Sellers often seem hesitant to adjust the listing price. However, a good real estate agent will intentionally list a home at the high end of the price range. By listing the house high, you take advantage of classic negotiation technique. As my grandfather used to say about negotiating car deals: “First you have to mark the car up, and then you can negotiate the price down.”
In selling a house, you should first “mark the price up,” like my grandfather always said. After a week, look at the following metrics:
- Number of showings
- Number of offers
- Average offer price
Lower the list price by $5,000 increments when there aren’t enough showings on the property.
If the number of showings is zero or low, then the price remains too high. Lower the price to cause the number of showings to increase. Attempt to increase the number of showings quickly at first. Quick adjustments require larger changes in price. After showings become regular and predictable, make smaller adjustments to the price to control the other data points.
Lower the list price by $1,000 increments when the showings are consistent but offers are not coming.
Once the number of showings is steady and consistent, you will next want to ask how many offers you are receiving. If you are not getting offers, then the price is still too high for the condition of your house. You have two choices at this junction. The first choice, and most expensive choice, is to make repairs to your home based on feedback from visitors. The second choice, and the fastest, is to make small reductions in price until people start to make offers. When the list price is closer to the value that your visitors assign to the property, offers will start to appear.
Lower the list price by $500 increments when the offer prices are too low.
Lastly, once offers appear, consider the average offer price. If the offer price is well below the list price, then your buyers think the house is overpriced. They respond by negotiating low. They hope that by giving you a low offer that you will either counter with a better price or let them walk away with a great deal.
When the average offer price is close to the list price, then you have found the right price for your home in the eyes of your potential buyers. At this point, just wait for the right offer.
By lowering the price in stages, you can make better choices about what the new price should be. Never trust a gut feeling when setting your home price. Use a predictable system that lowers the price to the market price without going beyond it. This staged approach discussed above will achieve that exact result.