What price the house should be listed for is often a point of contention between the parties. When there is conflict, it can be tempting to insert a price in the order so that the list price issue is no longer an issue.
At some point, the order’s stipulated list price makes its way into the terms of a listing agreement, and depending on when and how that price was determined, it could hinder or hurt the sale. Here’s why:
1. List prices are strategic.
Most buyers search on consumer sites like Zillow and Redfin. As they search, there are bracket pricing options - dropdown tabs where they search, for example, from $600,000 - $650,000, based on what they qualify for and can afford. If a property is listed for $599,000, the property does not appear in their results and we eliminate the entire buyer pool who are searching for $600,000 and above. A fixed price in an order can hamper exposure, and a good REALTOR® knows what the neighborhood “caps” are for these brackets.
2. Prices are fluid.
A value that was established last month could be obsolete, especially in an increasing or a decreasing market. Maybe there was an appraisal done a month ago indicating a $750,000 value. And then last week, three comparable houses on the block sold above $800,000. Worse yet, the market takes an abrupt turn and the comparable houses sold for less than $700,000. With new stats coming out daily, we need to have the flexibility to keep up with the market on a real-time basis, or we get left behind.
3. Lifestyle and intangibles affect the value.
Have you ever walked into a house with an overwhelming pet odor? Perhaps the downstairs has been turned into an at-home daycare center. Or, tenants living in the house are rude and off-putting, making buyers want to turn around and leave the moment they step inside. When buyers are house-shopping and looking at 5-10 houses per day, these factors all of a suddenwant to turn around and leave the moment they step inside. When buyers are house-shopping and looking at 5-10 houses per day, these factors all of a sudden put our house at the bottom of the list - and diminish the value significantly. We need the latitude to adjust the price accordingly.
Another problem is having built-in price reductions in the order. “The price is to be reduced by 5% every 90 days,” for example. When the average days on market is less than 10, an overpriced house that sits for 90 brings out the vultures, and barrel-bottom, low-ball offers are all we are left with. Terms like this can plummet a value by tens of thousands of dollars.
Best practice is to either leave the list price up to the recommendation of the REALTOR® or consult with the REALTOR® before creating the order so that the price is relevant and allows flexibility.
