Agents many times will hear sellers say, "We really need to net this amount". It will usually be followed by "We can always come down later."
This can create a costly error for you, the seller. No matter what you are selling, the pricing must always reflect the market in order to be successful and pricing should be based on an honest assessment of the market and local competition.
No matter whether you’re selling real estate or something else, pricing must reflect what the market will bear, not what the seller needs to make in the sale.
This is especially true in real estate. If a property is priced significantly over the market it will sit on the market for an excessive period of time and actually begin to lose value in the marketplace. A property can become shopworn, just like any other inventory. A property is at its peak immediately after it is listed. It will be reviewed by all of the realtors in a community and compared to buyer's want lists. Once a property has been on the market for 3 to 4 months, its ability to draw attention is seriously eroded. Aiming for too high a price point seldom works.
In a rapidly accelerating market, a seller is in the position to "anticipate" the market and price a property ahead of the market curve. The dangerous situation is the opposite in which the market is slow, or worse, shrinking. In those cases, placing your property above the proven selling range for similar properties can be disastrous.
It is very important that the seller and the agent understand the motivations behind a sale. It will usually come down to time or money. In other words, is the net price the most important motivation or is it the timing of the sale. In a situation in which a seller needs to move in a set period of time, the failure to properly price a property can be very damaging. Seller's should clearly discuss their motives with their agent to avoid serious misunderstandings in this regard. If you, as the seller, are committed to a certain net, be sure that it is within the envelope of the market. Avoid placing your price above what other similar homes have sold for that have been exposed to the market for longer periods of time. As a general rule, price will dictate the time on market. We all know that there is SOME price at which anything will sell. At the other end of the scale is a price that is at the top end of the market that may be obtained with patience. Beyond that price level is an area where only disappointment is likely to occur. This is especially true in a "buyer's market". Remember, buyers are very savvy. They will have looked at all those competitive prices and will be comparing your home to what they can get elsewhere. There is even a principle of appraisal, called "Substitution" which states that no one will pay more for the same thing. This is one of the principles employed when doing comparables for an appraisal. Try to avoid a disconnect between the desired net and what the market will do. An inflated price, even if only by 5 or 10% can make the difference in getting the sale and may in effect sell your neighbors homw as opposed to yours.
Markets are fairly predictable things and your agent will show you the data with which those predictions can be made. The real estate market is slow to move and not subject to great volitility, market data can be trusted to provide a snapshot of the current appetite for a property at a given price. Serious mistakes have been made around the country in areas where price appreciation slowed or stopped all together and sellers and over eager agents did not respond and priced properties based on desired nets and not on market data. A properly priced home will stand out and will be quickly absorbed.