Should We Raise the Sales Price of Our Home?
A seller who asks if we should raise the sales price can be a seller who believes her home was priced too low. A second common reason a seller would think about raising the sales price is that an offer arrived very quickly. It's human nature to wonder if an offer that arrives within days of listing means the home was priced too low when it's more likely that a fast offer generally means the opposite: that the home was priced perfectly. While I won't rule out the possibility that a home could be priced incorrectly or below market value, it is also uncommon for the marketplace to fail to react to this type of pricing, so the chances of selling your home at a loss are very low.
Additional Reasons a Seller Might Ask to Raise the Sales Price
It would be remiss not to point out there are also those sellers who want to raise the sales price because there have been no offers or showing activity. They rationalize that a higher price would bring in different type of buyers and, while on the surface you might be tempted to say, Whoa, wait a minute, this sounds like a crazy plan, there could be some truth in that approach. The correct analysis, of course, is if a home is not selling, if it is not encouraging buyers to view it, there is something off-kilter and most of the time that something wrong is the price.
It is often priced too high. That makes going higher sound like a defeatist plan. But maybe it's not.
Take a home, for example, that is priced at a particular threshold, at a point where there is a dividing line for search parameters and little inventory at the upper end of that bracket. For purposes of illustration, let's say that dividing line is $499,000, and most of the homes that sell in that particular area in that price range are below $465,000. A seller could be priced in the wrong market. There might not be any homes for sale between $465,000 and $499,000 at the moment. Buyers who are looking at homes over $500,000 might never see this home priced on the cusp of $499,000.
If that home is easily worth $499,000, pricing it at $505,000 might pull in a different type of home buyer with an over-$500K mindset. However, if it is not worth $499,000, then pricing it higher probably will not help.
Another angle is when there are a number of multiple offers, each more than list price, and the seller, for whatever reason, does not want to counter those offers. Not everybody enjoys engaging in the countering process and counteroffers. Some sellers absolutely dread this process. For these sellers and that type of situation, it might make sense to raise the sales price and then let the buyers outbid themselves.
Establishing a higher price point from which to begin making purchase offers might also weed out the buyers who were not serious. It is not uncommon in multiple offers for a buyer to make an offer just to try to tie down the home, maybe without viewing the home at all, with the option to later cancel the transaction. This is bad for the seller and probably against the law for the buyer to attempt, but buyers do it, often on terrible advice from an agent who just doesn't know any better but should.
How to Tell if a Seller Should Raise the Sales Price
As a standard of practice, look at the type of reactions from the marketplace after putting your home up for sale. Analyze the responses, buyer feedback, and activity. Also, try not to become greedy, because greed is a characteristic buyers can detect, and they typically do not want to work with a seller who exhibits that quality.
- A bunch of offers all exceeding list price could mean you need to raise the sales price.
- No offers after 3 to 4 weeks of showings could mean the home is priced too high or something else is wrong, and that is not necessarily the time to raise the sales price.
- If the seller receives one offer right at list price, maybe even a lower offer from a second buyer, it most likely means the home was priced correctly; just right, like the story of Goldilocks and the Three Bears.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.