Pricing Ahead Of The Curve

The fall real estate market is in full gear. It’s a great time for home sellers to keep a valuable principle in mind in order to procure the highest price for their home. It’s pricing “ahead of the curve.”

The Pricing Ladder

To understand the way in which the pricing ladder works, let’s use an example of a homeowner who wants to price their home at $1.550M despite your $1.425M recommendation. The seller is adamant about their price, thus the home is entered on the Multiple Listing Service at $1.550M. Let’s see how it initially compares with the competition.

1. Competitive #1: $1.625M
2. Competitive #2: $1.595M
3. Competitive #3: $1.550M
4. Subject Property: $1.550M
5. Competitive #4: $1.495M
6. Competitive #5: $1.475M
7. Competitive #6: $1.450M

As you can see, the homeowner essentially chose to price their home in the middle of the pack.

One Month

Let’s take a look at what can often happen, sometimes within as little as two weeks time.

• Competitive #1: (Withdrawn from market)
• Competitive #2: (Reduced to $1.499M)
• Competitive #3: (Reduced to $1.479M)
• Subject Property: $1,550M (Price remains at $1,550M)
• Competitive #4: (Price remains at $1.495)
• Competitive #5: (Under Contract)
• Competitive #6: (Under Contract)

Additionally, two more comparable homes have come on the market listed at $1.475M and $1.450M respectively.

Re-Shuffle

Now let’s see how the subject property stacks up compared to the re-positioned competition.

• Subject Property: $1.550M
• Competitive #1: $1.499M
• Competitive #2: $1.495M
• Competitive #3: $1.479M
• Competitive #4: $1.475M
• Competitive #5: $1.450M

By initially pricing their home “in the middle of the pack,” the homeowner set themselves up to soon be the most expensive offering of all the comparable homes.

Net, Net

The end result is a longer market time. Since there is a direct correlation between market time and sale price to list price ratio, a longer market time is seldom in a home seller’s best interest. To take advantage of the fall market and sell your home for the most money that the market will bear, my suggestion is to price it “ahead of the curve.”

What are some other advantages to pricing ahead of the curve?

Under what circumstances is it beneficial to price at the high range of the other comparable homes?

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.