Pricing Strategy: Feeling Lucky

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by Osman Parvez

What's your pricing strategy?   In Boulder, "Feeling Lucky" too often seems to be the answer.   The consequence to the seller's bottom line can be brutal.

Part of the problem challenge is that we're a small, low volume real estate market with houses that range in price from below $300,000 to well over $3,000,000.    This lends itself to high volatility (one reason you can't trust statistics from Zillow and other data aggregators) and a limited set of comparables.   To accurately price listings,  it's critical to have deep knowledge of market conditions, including seasonal factors and the prevailing trend.

Strategy:  Feeling Lucky

Here's how "Feeling Lucky" usually goes down.
Ingredients:
(1) Aggressive and salesy listing agent.
(1) Emotionally attached seller.

Stir it together, pour into a greasy pan,  and toss it in the oven.

Sadly, Flattery Gets You Somewhere

For a listing agent, the laziest easiest thing to do is massage a seller's ego by shooting for the moon on price.    Oohing and aahing when the seller shows you the house helps, but really, the most important part is to gush about how high the price should be and how confident you are in obtaining it.    It requires little to no effort researching market conditions and if you're convincing, it has a high probability of getting you the listing.   Voila!

Sadly, the end result is all too predictable.   When a seller overprices their listing, they inevitably blow the honeymoon period (first few weeks).  Buyers agents may drag their clients to come see it anyway, but they'll balk at the listing price, even if they love the house.    If you're too far off the mark on your asking price, many buyers will just assume you won't be reasonable on negotiation. They don't even want to put in an offer.   I've see it over and over, again.

A few months later, when you adjust your asking pricing back to reality, it's too late.     When buyers now come to see the house, instead of sensing exclusivity and worrying about another buyer scooping it away, they look at the high days on market and want to know what's wrong with the house.    To them, it feels like a well picked through jumble at Nordstrom Rack.    Buyers won't covet, much less pay a premium, for a house that so many others have passed on.  

As the months tick on, the once confident and full of bravado listing agent shrugs his shoulders and blames it on the market.  Eventually, the seller gets impatient and drops the asking price.    Often, you'll see the asking price trickle downward slowly.     Summer turns to fall, and the seller will likely end up negotiating with a low baller, eventually accepting a far lower price than the market would have brought in the peak summer selling season.

Game Over

I've been obsessively tracking Boulder real estate since 2004.   Year after year, negotiated discounts are largest in the 4th quarter (October through December), even during a strong market.   The 4th quarter is almost always bargain season for real estate in Boulder.  It's typically the worst time of year for sellers.    That's if you care about maximizing the sale price, of course.

p.s. Some Realtors take stale listings off the MLS before Christmas, and reinsert them sometime after January.   This so called "refreshing" technique makes the listing appear as if it's new to casual observers, but will not fool a serious buyer.   A buyer's agent with even the most basic skills can quickly pull up the full history of the property.  It can make the seller look disingenuous which is why I don't recommend it unless significant changes/improvements are the reason the property came off the market.

Additional Reading

Pricing Strategies for a Rising Market

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Please note:  My goal is to provide exceptional service to our clients. The ideas and strategies in this blog post are the opinion of the writer at the time of publication. Careful and complete due diligence is strongly advised before buying or selling real estate or other investments. Consult with your professional advisers before making financial decisions. This article is not intended as legal, tax, or investment advice. Silver Fern Homes will not be held liable for investment choices derived from this article.