How many times in my 14-year real estate career have I heard home sellers tell me during listing appointments: “Well, let’s start out with listing price x, we can always lower it later if we don’t see any buyer activity…” At first glance, the theory behind this statement makes total sense which is to test the price elasticity of the market, in stages. “After all…”, so I was once told by one of my seller clients, “…I can always reduce my asking price, but I can’t go back and increase it!”

Fast forward ten years, where real estate professionals such as myself are now equipped with state-of-the-art statistical packages and market analysis software that will eliminate the guesswork out of property pricing and marketing. Hence, I am about to bust the above mentioned MYTH that “Let’s start out with x, and then go to x-y” is beneficial to your net proceeds at closing.

For the purpose of this exercise, I am using data in all of zip code 60646 combined, simply because this particular software that I am using (Agent Metrics by Terradatum) does not know yet how to separate Edgebrook, Sauganash, and Gladstone Park data. And, it doesn’t have to because I am just trying to answer the question: Is the ratio of sale price to original listing (asking) price higher when there have been no price reductions, or, is this ratio higher when there have been one or more price reductions? Obviously, a higher sale price to original listing price ratio would mean that the sellers sold their home for a price that was rather close to their asking price. The findings for 60646 (single family homes) will boggle your minds.

Sale Price to Original List Price Ratios

And here are the detailed data that go with the above graph:

Sale Price to Original List Price Ratios

Over the period of the last thirteen months, the data show that those home sellers in 60646 who succeeded in selling their homes without ever reducing their asking prices prior to accepting a contract, sold their homes for an amount closer to their original asking price than those home sellers who reduced their asking prices at least once, prior to accepting a contract. Every month, without exception.

Conclusion: In a buyers market such as the one we’re in at the moment, it is imperative to initially establish a listing price that is either at fair market, or slightly below fair market, in order to net more at the closing table. In some months, this pricing strategy has even proven to reduce the average market time vs. homes that underwent at least one price reduction. Food for thought…

Popularity: 1% [?]