A college professor did a research project on list prices, and it got picked up by the Wall Street Journal (you may need to be a subscriber):
They lead you to believe that if you price your home higher, you will sell it for more money – and if you list low, you will sell it for less:
Sellers who listed their homes…
- …10% to 20% higher than other homes in the neighborhood saw a slight increase of 0.05% to 0.07%, on average, in the sale price.
- …10% to 20% lower than other homes in the neighborhood saw a slight decrease of 0.5% to 0.8% in the sale price.
- In 10 sample listings, real-estate agents recommended underpricing homes at a frequency of 70.4%.
Source: Journal of Economic Behavior & Organization, May
But their stated increase is $117 to $163 – not per square foot, or in thousands, but literally $163 higher. I know, I know, if you found $163 lying on the street you would pick it up….but if you are basing your pricing strategy to snag that extra 0.07%, let’s point out the following:
Your list price needs to bear some resemblance to the recent sales around you. Buyers are better educated than the sellers – and usually know more than the agents too. Not only do they intently study all the evidence from the internet, but they have visited some or all of the recent sales – they know the market.
In a healthy market of educated buyers, homes that are priced right should sell quickly. Conversely, if your home hasn’t sold in the first month, buyers think the price must be wrong, and will lowball you or ignore you altogether.
A good listing agent can help you price aggressively in the beginning, and if the market doesn’t respond, then give you accurate advice about when and how to lower the price to still achieve top dollar.
Those who just read the soundbites will use this article as evidence why they should price high, but if true, why not just price at +100%? The article can be compared to the white-washing that Freakonomics did of agents pricing their own homes for sale, which was also off-base.
A good listing agent has sound strategies and advice on how to use your list price to your advantage – get good help!
The full research paper can be found here:
She appears to be intrigued by housing – here is a review of a previous 2009 research paper of hers entitled ‘The American Dream, or the American Delusion’: