It is critically important to price a home correctly when it first comes on the market. The reason is simple: The greatest numbers of buyers are going to see the house during the first two or three weeks.

Sellers who price their home correctly are likely to be rewarded. Those who overreach, who think they can “just wait for the right buyer to come along,” are likely to be disappointed. That usually means sitting on the market and taking a big hit financially.

We took a look at all resale homes that went to settlement in Northern Virginia as well as the Metro DC area in October and November 2015 and broke them down into just two categories: Those that had to reduce their initial list price before receiving a ratified contract (homes with the “wrong” price); and those that came on the market at the “right” price and never had to drop their list price.

The consequences of pricing strategy were starkly different. Homes that had to reduce their price before attracting a buyer in both areas were on the market three times longer – an average of 96 days in Northern Virginia and 98 days in metro DC, compared to correctly priced homes that sold in just 32 days in Northern Virginia and 30 days in metro DC. Sellers of homes with the right initial price were less likely to pay any subsidy, and when they did, it was likely to be a smaller subsidy. In both cases, fewer than half the sellers of correctly priced homes had to pay a subsidy.

But the biggest impact of pricing strategy is on the final sales price. Homes that sold without having to reduce their price sold for an average of 98.4% of the list price in the metro area and 97.8% in Northern Virginia. Those that came on the market too high had to reduce their price by roughly 6% before a buyer was willing to make an offer. And when that offer came in, those sellers had to negotiate a further reduction, ultimately settling at an average of almost 10% below their original price.

So let’s sum it up. Homes that hit the market at a price that attracts buyers are on the market an average of just one month and sell very close to list price. The wrong price means more than 90 days on the market and a 10% discount to original price.

Buyers will move forward on homes that are priced correctly, and they will take a pass on those that aren’t. Getting the price right from the beginning is the most important thing a seller can do. It really is that simple.

…From the McEnearney Associates Blog