Five different home pricing strategies when selling a home

Reader Question: We want to know about different home pricing strategies when selling. We will be selling our home in the spring. We have had an appraisal, two agent opinions and done research ourselves. There is a range between the highest and the lowest estimate of 40K. We do not have a deadline for occupancy. The market here is balanced between buyer and seller. What can you tell us about pricing options when we enter the market.

Monty’s Answer: Home sellers utilize several different strategies to enter the market. Most often, personal circumstances drive decisions. Examples are employment, changes in family size, medical, financial and a host of others. Different motivations can affect pricing.

Defining the range of value

All of these options depend on the quality of the data. My experience is that home sellers’ ideas are often biased, plus biased agent price opinions and poor appraisals reduce the quality of the value range. Look objectively at the comparables and the adjustments to judge if they are reasonable when setting the value range.

Five different tactic

1. 
   The fire sale is emotional and driven by financial distress, emotional turmoil or disingenuous advice. Occasionally, the seller is financially independent and has no time or interest in doing anything but signing a deed. The owner just wants to get rid of it today. These sellers are often below the low-end of the home’s value range which can be poorly maintained or in mint condition.
2. 
   The low end of the value range is typically where the homeowner has not taken proper care of the property. Many home buyers will not consider a home that needs work, but many seek homes that need work. It is a great way to gain sweat equity.
3. 
   The midrange of value is where the home has visible areas that will require attention, but they are easily maintained. All homes wear out naturally unless the owner intervenes. Showing wear, nicks in the walls and woodwork, and overgrown landscaping are examples.
4. 
   The high end of the value range is for homes in the most desirable neighborhoods, and the home’s condition plays a role as well. If there is zero work to be done and the condition is pristine, the house will sell itself. Many homebuyers will want to be the next owner.
5. 
   Testing the market is a strategy utilized when the homeowner has the luxury of time. They go to market priced above the high end of the value range or the value range’s expected place. This home features some type of appealing “hook,” and there are examples of the seller being right.

Questionable tactics

Some tactics rarely work and the seller could merely reduce the price. Examples of these are agent-selling bonuses, a car in the garage, mortgage buy-downs and more.

Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com