If your visibility and marketing are excellent, perhaps — but don’t count on it

Key Takeaways

• An underpriced home in a healthy market may attract multiple offers that push the price higher — but only if visibility and exposure are excellent.
• Don’t underprice a listing if you don’t have great visibility and marketing — that’s leaving cash on the table for your seller.
• There’s a similar risk in overpricing — prices can be chased down below value.

If a market is healthy with a fair amount of demand from buyers, and you get multiple offers in the first day, does that mean you priced it right or too low.

Most agents experience this concern in some form or fashion. Often homeowners will ask their agent, “Did we underprice it? Could we have gotten more?”

The good news is that in a very strong market pricing often self-corrects.

Think about how an auction works.  It’s starts off at a fraction of what it should sell for. Buy the end there usually a number of buyers pushing the price up higher than it should be.  

A housing market that has a lot of buyers, the danger for sellers is in overpricing rather than underpricing a listing. Underpricing most often leads to multiple offers on the property, that naturally pushes the price up — so long as you have good visibility so everyone knows about it in time. If you don’t have good visibility on the home, then there is a strong possibility of that homeowner netting less on their home sale.

Pricing a home correctly can be tricky and warrants more time and investigation to better your odds of getting it right.  

Agents must be careful. If you don’t have a strong marketing plan to enhance the visibility and presentation of home prior to listing, and you drastically underprice it, then yeah, you’re definitely leaving money on the table for your client.

I see this happen frequently. Recently I saw a home that should have been priced at $500,000, but was priced by the agent at $400,000, and it sold at $450,000 in a day. The sellers really lost out by hiring that agent, unfortunately. I’m not sure if the agent just didn’t do enough homework prior to listing it. They may had a seller that wanted to sell quickly, but $400,000 for that home was way too low. I didn’t learn of it until after it was under contract. Had there many a big marketing push so all local agents new about this opportunity I believe the sellers would received something closer to the $500,000 amount.  

The market doesn’t always self-correct, especially if visibility on the opportunity is mediocre.  

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Again the biggest danger is not underpricing a home, it’s overpricing. There will always be sellers who want to ask for than what you recommend. If you give sellers a range of what the home could sell for, they’re always going to want to be at the top of the range.

It’s okay to list at the top of the range of what a home could sell for, so long as sellers understand their going to have to do some work to maximize the overall presentation of their home.

It’s important to illustrate that there is risk by pushing up too far. Agents might have a range based on their research but homeowners have their own range. An agent may determine the home will sell between $300,000–$325,000, and the sellers may be thinking it’s closer to $3250,000–$350,000.

It should be no surprize that sellers want to get the most possible for their home. It’s just human nature.

Some agents use charts and different things in their listing presentation to show the dangers of overpricing a home, and that’s okay.

However, I recommend agents use stories.  Sharing stories of what happened to other sellers who were in a similar situation often has a more profound impact on helping homeowners make better decision for their own situation.  

The sellers are overconfident in their house and what it should sell for, and maybe ignore the first offer that comes in because they’re insulted by it. But they’ll end up selling for far lower than that in the end, because the market can be brutal to homes that are on the market too long.

After days of market exposure, people start wanting to know what’s wrong with it. When a new buyer comes along, they don’t care that the seller has done two, three, or even five price drops. They’re going to look at it and say, “Oh, it’s been on the market for 180 days.” They don’t care if you just dropped your price yesterday; they’re going to offer an even lower number that is meant for a property that’s been on the market for 180 days.

So that’s the conversation you need to have with your sellers and give examples and stories so that they don’t make that mistake. You have to be really confident in your ability to get them the best price with your strategy. I’ve made that mistake too many times, so this is something you really want to understand and get good at. The implications for your sellers are just too high otherwise.