Problems with inaccurate pricing

If you don’t price your home directly yourself, you are likely to be guided towards two equally bad outcomes:  an underpriced listing with multiple offers or an overpriced listing that languishes on the market. On the one hand, real estate agents may try to “buy your listing” buy promising they can sell your house for a higher price than it is worth or the competition due to their proprietary marketing techniques, only to lower the price to saleable level later.  And on the other hand, many agents will try to convince that they can do a good job for you by getting multiple offers after mis-pricing your listing. Misunderstanding both of those concepts can cost you a tremendous amount of money!

Firstly, regarding the multiple offers.  It sounds exciting to a home seller to get multiple offers!  As a seller you get choices and you get offers. That’s good right?  But consider why those multiple offers come in-- the home has been intentionally underpriced right out of the gate.  And because it has been underpriced, there is usually a rush around the offer review data in order to line up as many of these offers as possible.

But that kind of a fire drill is going to make other buyers less likely to bid because it’s not clear what the house will end up going for.  Missing out on buyers definitely ends up having a negative impact on the price. How much?

As you might imagine economist have studied this effect as well.  And what they found is that when real estate agents sell their own homes, they do so by letting the homes it on the market longer in order to secure a higher price.  This effect as measured by Severson et al [find] who found that the average agent lists their home for X days longer and gets a Y% higher price.

The other mistake of overpricing your listing is less harmful-- the main impact of a listing that is not priced accurately is that it will accumulate days on market.  You can take your shot at a higher price and if it does not work, then you’ll need to lower the price to attract more buyers.

However, the downside of doing this is you may end up paying more in commissions since you’ll have less leverage on the home sale.

[note-- these are just statements, will be good to refactor htis or bakc it up with some facts.  We can get the Severson paper linkedin in]


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