Here’s an observation that may not be true in all areas, but one that I’ve seen consistently. When a home is for sale, there seems to be two schools of thought:
Price it high, and hold out for a sucker
Here the idea is that all you really need is one person to be willing to pay your bloated price, so you might as well price it 10-20% above what the comps would suggest. Then you wait, not taking any lower offers. If it’s still not sold after 2 months, you lower the price 5%. Again you wait, not taking any lower offers. After another 2 months, you make another 5% drop. Rinse and repeat until you get a taker.
We actually found a place we really liked and put in an offer for what we thought was slightly below market value but fair (and what we were willing to pay). Let’s say it was listed at $600,000. We offered $480,000, and was promptly countered at $580,000. We walked away. The problem with such an annoying seller is that sooner or later they either keep lowering their price, or all of sudden get desperate. The market is getting softer, and it ended up selling at $475,000 to another buyer 4 months later, below our initial bid!?! Very frustrating.
This type of thing probably worked a couple years ago, but now it just seems risky and annoying unless you really don’t want to sell. Sure you might get lucky, but chances are you’ll be holding on the house for a long time.
Price it low, and get it sold quickly
The other type of seller lists it for under market price by 5-10%. When a house is first listed, you have the greatest amount of attention from every buyer looking for a similar house. You can generate buzz, and hopefully a bidding war. The seller may not get every last penny, but the house is sold and they can move on to the next deal. After the first week or two, you’re just left dealing with any new people looking in that area, and interest drops off significantly.
My feeling is that if our sellers simply listed at $480,000, they would have gotten multiple offers and could have played them off of each other, possibly ending up with a final price $500,000. But they decided to gamble, which didn’t work out for them but could still do okay for others.