Jim, when you say “be within 5% of the last comp”, you’re saying to add 4.999% to the last sold price nearby to determine a list price for my house?
That’s how most sellers and agents will do it. But motivated buyers will compare it closely to other sales – homes they have probably seen.
When prices are rising quickly, pricing accuracy isn’t that important – the market will catch up shortly. But when the market is flat with a potential to stay flat or worse, listing your home for the right price is much more critical. Buyers don’t mind waiting – it is very comfortable on the fence!
The values between similar houses can differ by approximately 10%, based on location, view and condition.
To price within 5% of the last comp means +/- 5%.
If the last sale was superior to yours and you add the 5% to their price, you could be 10% too high from the beginning. If yours is king of the hill, it is still smarter to list at only +5% to look very attractive, and push for multiple offers. But you have to have an agent skilled at causing effective bidding wars!
Could you fool someone? Not the highly motivated buyers – they are the people willing to pay top dollar because they are the most comfortable knowing how it compares to the rest. In a flat market, the casual or uninformed buyers aren’t as comfortable, and want to pay less.
The frenzy appealed to the casual and uninformed who just jumped at a house and paid whatever it took, regardless of comps. But those days are over, and the motivated, informed buyers are making the market.
As a result, sellers are smart to price their home to sell in the first week or two on the market. Once you agree that you want to use the initial urgency to help push the sales price to top dollar, then carefully analyze the comps – like buyers do – to arrive at an attractive list price, instead of automatically adding 5% or more to the last comp.
It boils down to this:
When you catch yourself wanting to ‘tack on a little extra, just in case’ – resist that urge, and instead price it to sell, not sit.