The dilemma: What to set the listing price at?
The solution: Look at a combination of factors:
There is no easy route to figuring out how much to list your home at. There isn’t a book you open and the magic number appears, but with some research and a little bit of guessing, you’ll come at a price that is both good for you and for buyers. The first step is to locate and secure a knowledgeable Realtor, such as myself. Once you secure that Realtor there are a number of factors to consider.
Pricing homes when inventory is low
When inventory of homes for sale is low, a home seller can set the price close to market value, plus or minus, and their home will sell. When there is little or no competition for your home, listing prices can be set at 5-10% over the market price. But, even with low inventory, buyers aren’t going to pay whatever you’re asking since they are still looking for a bargain.
Pricing homes when inventory is high
As inventory of homes increase, as we’re now seeing in South Lake Tahoe, homes priced 5-10% below comparables will get the attention of more home buyers than those priced higher.
So where do you set your listing price?
There are a couple of schools of thought when setting the listing price of your home. Most real estate agents will typically suggest asking above market price (5% to 10%) with the idea in mind that offers will come in below that asking price. We assume the buyers will come in with a counter offer since .and hope the initial offers from potential buyers will come in higher than expected. However, some agents will suggest a lower asking price than comparable properties in hopes of starting a bidding war as they do in the Bay Area, but typically in Lake Tahoe they’ll start with a higher.
There was a recent article in the Wall Street Journal, the results of a national study posted in the Journal of Economic Behavior & Organization showed interesting results. They found that homes priced 10% to 20% higher than similar houses in the same neighborhood see a slight increase in the sales price. On the other hand, homes priced 10% to 20% lower than market price saw a decrease in the selling price. On the contrary I have found the opposite to be true with Lake Tahoe listings. I usually suggest to my sellers to list their homes 5%-10% above market price with the expectations that an offer will come in below that. I also recommend if there are no offers in the first 30 days, then a price reduction sequence should be started.
Pricing a home too high in Lake Tahoe will not always get you more money and it could cost you in the end. If its overpriced, it stays on the market longer and the buyers will stay away from it because buyers may think something is wrong with it. If it’s priced right, accounting for the condition of the home, it gets all sorts of interest.
Bottom line, from experience, I have found that you need to price a home as close to actual market as possible, maybe up to 6% above that price. Currently, the average home in South Lake Tahoe is selling for 93.6% of asking price. Your experienced Lake Tahoe real estate broker or agent will help look at all of the available data to set your price correctly. Call me if you’d like a free consultation or any more information on pricing your Lake Tahoe home.