Realistic pricing in the busiest buyer pool adds thousands to sale
There are many strategies that come into play in a successful real estate transaction; however, none is more important than pricing the property correctly from the start. Consider this: From May of 2022 to May of 2023, lake home listings that did not drop their prices while on the market (i.e., priced close to market value from the start) sold in an average of 26 days for 97% of their list price. In the same period, homes that started above market and had to drop their prices lingered on the market for 67 days. That’s 41 more days the owners had to pay mortgages, taxes, utilities, etc. On average, they sold for 94.7% of the lowered list price and a whopping 84% of the original list price. These real, measurable costs are too important to ignore when you choose your list price. Now more than ever, it is so valuable to start a listing at a realistic price.
Traditionally, the strategy was to start well above the market so you have room to negotiate down. However, today’s buyers are very, very well-informed. Thanks to the internet, they often know every recent sale which they use to form their own opinions of your list price and frankly, you. To appraise, a property needs to have comparable properties in about the same price range that closed in the past six months (or stretched to a year if there aren’t any other comps). If you live on the lake, you already know that it’s hard to find similar properties because the lake attributes that influence the price are so variable. Big views, deep water, gentle paths … all these add significant value to the home. Unfortunately, your love and warm memories of the home do not translate to the bottom line at closing. What you “need to get out of the sale” is also irrelevant. Value comes down to measurable attributes such as size, location, features, lake assets and other tangible characteristics. It’s the hardest thing in the world to mentally convert your wonderful, loving home to a product to be sold; but if you make that transition, the whole process will be so much less stressful for you.
As you think about pricing your lake home, here are some aspects you should consider:
- Virtually everyone searches for homes on the internet. All of those search programs have minimum and maximum values which usually round to $100k increments. To illustrate, if you price your home at $504,000, then anyone searching up to $500,000 will not see it even though it’s just barely out of their range. Instead, it will show up in searches up to $600k and probably won’t win that comparison. That is a HUGE buyer pool that you will miss, so always keep in mind the way people search on the web.
- There are two schools of thought on whether to select a price ending in all zeroes or make it seem like a bargain by dropping it down a few dollars to end in 99 or 98. There is a subliminal value to ending a price below the bigger number; for example, a house at $499,000 feels like it competes with other homes in the $400s; however, anyone searching from $500k-$600k will not find that property on an internet search. It’s a question for your agent who knows the active price points in your market. One way to look at it is if your home compares favorably to the ones up to $600k (usually relating to curb appeal and location), then starting at $500k is probably fine. If it does not, then you may want to start at the slightly lower number. It is a point worth discussing with your agent.
- Believe it or not, there are also magic price points. $500,000 is one example, and so is $1 million. A price point of $500k could easily have double the buyer pool of a $505k price. It’s all about the internet search. Consider the buyer pool you’re trying to appeal to. If you have a good agent, she will know where the most buyers are at that point in time. There’s no formula for this as it changes constantly. If she gives you a range, make sure you choose the part of the range that maximizes the number of buyers. This is especially important if your home has an issue like a steep path to the lake, deferred maintenance, out of style, or whatever obstacle you’re trying to overcome. Why? Because your best friend in that situation will be multiple offers. You will get the strongest offer with the fewest contingencies if you choose the most competitive price. If there’s only one bidder, they will ask for more repairs and considerations, guaranteed.
It’s worth noting that the lowest point in the range is not always the busiest, so sometimes it’s not the best choice. As an example, say there are 20 homes available in the $700s and just two in the $800s. Your agent tells you the range is $775-$850, and your home has great curb appeal. It probably makes sense to aim for the $800s since there’s little competition. That scarcity also comes into play.
- Don’t get stuck on price per square foot. This is a valid consideration in a subdivision where lots and construction are similar. For those homes, the lot is usually around 20% of the value and the home itself is 80%. On the lake, the lot is at least 40% of the value and can go even higher. Price per square foot has less meaning when lot values vary as much as they do on the lake. So far this year, the median price of a lakefront home is $338/sf, but the range spans from $131.50/sf to $5,755/sf. Appraisers and agents look for similar properties to determine value. Size matters some, but it’s the combination of features that determines value.
- Especially if your house is considered a luxury home, make sure your agent provides luxury marketing materials. If you are giving your listing to a friend or family member who does not invest in high-end marketing, definitely choose the lower price. Everything a buyer sees at a showing conveys the value of the home. Ink-jet printed flyers, no tour, cluttered staging and poor presentation suggest that it is a mediocre property. Dirt, clutter, smells, darkness … all these also tell the buyer this property is unimportant. However, high-end materials, professional photography, purposeful staging, custom signs and motion video tours confirm to the buyer that this home is worth more. There is a great deal of data proving that these efforts pay off monetarily.
- Consider your timing. If it’s a second home and you don’t care how quickly it sells, you can aim for a higher price in the suggested range. If you need to move quickly, go for the lower, more aggressive price. We still get multiple offers on aggressively-priced homes.
- Make sure you have a real, motion video tour. During the selling frenzy in 2021-22, homes were selling so quickly that most agents stopped providing tours. They are expensive. It is now a more competitive market, and some never started ordering tours again. Why is this important? Because a lot of lake home buyers do not live in this area, and a still picture cannot capture the magic of lake living. If you want your buyer pool to be the world rather than local people, make sure there’s a motion video tour in your listing. The more buyers who are interested in your home, the higher your sales price will be and the quicker it will sell.
Pricing strategies change over time, and very few lake residents are first time buyers. What worked in the past may not work the same now. Choose the strategy that supports your timeline, money requirements and lifestyle. Starting with a lower price can yield better results if you are deliberate in choosing your starting point.