Recently, I listened to a podcast by the wonderful Steven Thomas of Reports on Housing that discussed the importance of and factors behind pricing in today’s market. No longer are we in the same kind of residential real estate marketplace we experienced from 2020 through the first half of 2022. As Thomas explained, we’re experiencing a balanced market now where pricing, which was always important, is more critical than ever before.
Today, there’s no “let’s just see” on pricing or “wiggle room” to price a little higher and hope for the best. In this balanced marketplace, precision pricing ultimately wins the day, which means removing emotion from the equation and pricing based on what the house is actually worth.
A home, Thomas said, is, by virtue of its very purpose, an emotional asset in your life. It’s where milestones are celebrated, family visits are arranged, and holidays happen with decorations and twinkling lights. And that’s exactly as it should be … but none of that (unfortunately) really matters when pricing a home. You can’t base your home’s value on happy memories. Those are for you.
Thomas explained that as a result of this difference between emotion and logic, a lot of homes end up overpriced. Sellers think they can simply come down on the price later if the price is wrong, which is never a good starting strategy for home-selling success.
Then, the overpriced home sits on the market, frustration builds, and sellers look to the real estate professional for answers. It’s never a position you want to be in, which is why I always sit down with the sellers I work with and have a data-driven, experience-led conversation about what price I believe will attract the most attention and be most advantageous for them.
An “extra cushion” of pricing doesn’t work in this market. It’s not necessarily a negotiating chip. Often, negotiations today revolve around terms of the agreement and aren’t about the actual price of the home. When a price is well thought out, a buyer knows it, and they’ll negotiate on other aspects of the deal while accepting the listing price.
“Now you have a tug of war between buyers and sellers,” said Thomas of this balanced marketplace. “Pricing is so fundamental.”
An economist of the real estate marketplace since 1991, Thomas explained that property pricing that seems like throwing darts at a dartboard to land on an arbitrary price simply won’t work. “It boils down to motivation,” he said, because once you understand the true sales price of your home based on its fair-market value, you may not be motivated to sell, or it may be just what you expected and you’re ready to go to market.
Thomas said there are more delistings—or listings that came off the market and never returned—this year than in the three-year average prior to the pandemic. More homes than ever are being pulled off the market, which begs the question: Why?
It might be a lack of motivation. The sellers were seeing if they could get a certain price, and when they couldn’t, didn’t really want to sell. It might also be that the sellers aren’t exercising “precision pricing” and the price isn’t right. Buyers know it, so instead of having their property sit on the market, sellers are deciding not to list anymore.
Thomas describes our current marketplace as “sluggish,” where there’s more supply, less demand, and prices are dipping slightly in many markets as a result. In other markets, pricing is flat, creating a sort of “lull” environment that’s balanced and stable.
“Be meticulous about price … pull the emotion out of it,” Thomas advises, and I agree! Price as if it weren’t your home. Price as if you’re an appraiser. Use logic over emotion and you’ll arrive at the true price for your home.
One place you won’t find the true value of your home is by checking AI or Automated Valuation Models. They simply don’t understand the nuances of the neighborhood, the curb appeal, the craftsmanship, the upgrades, the condition of the home, or the overall presentation, says Thomas. And the right price should take all those factors into account. It requires taking a look at the most recent pending sales and closed sales—not from a year ago, but fresh market activity to help you determine what’s happening in your local marketplace right now.
Thomas ended with a topic that is near and dear to my heart: turnkey properties. I’ve always said when a home is in good condition, in a good location, and priced properly, it will sell … fast. It doesn’t matter if the market is balanced or “sluggish” or favoring buyers or any number of factors. Those types of homes are always going to create competition among buyers and will, as Thomas affirmed, “fly off the market.”
You can feel when a property is priced right. Everything aligns. The photos, the videos, the marketing plan, the in-person experience. It feels completely right because it feels exactly like home.
Questions about my pricing strategy? After 30+ years in real estate, I’ve developed a highly honed skill in assessing the true worth of your home. Get in touch for a complimentary home-selling consultation today!
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Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California
Properties • DRE: 00941825 • 818-380-2147 • andrew@andrewmanning.com