John Jones shares his pricing strategy for the current market.

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Transcript

JOHN:  Hey, guys.  John Jones here with another edition of Tuesday Morning Coffee.  Today, we’re going to talk about pricing and pricing in the market and how buyers actually buy homes.  And the point that I want to make is I had a situation the other day that’s not uncommon, happens quite a bit.  I was sitting there with a seller and we’re going through the comps and we’re going through the absorption rate and we both were pretty much in agreement where the price for this home would probably ultimately sell.

Probably somewhere between 185 and 190.  Well, after discussion a little bit on where we should price it, they wanted to go higher, like $209,000.  And I asked them why would you want to go that high.  And they said we would like to leave a lot of room for negotiation.  We think if somebody’s going to come in here and make us a lower offer, we have negotiating room.  And there you know I see where people think that because we get that all the time.

But let me tell you how people buy homes.  People buy homes by comparing them to the other homes for sale.  So for instance, let’s take the house we were just talking about.  Let’s call it house A and it’s priced at $209,900.  And the house down the street, which is house B, is priced at $199,900.  First of all, a lot of people may not even look at price A because they may have parameters where they’re only going to $200,000.  They might not even come across that house.

So you miss a whole pool of buyers if you price out of the market.  Secondly, even though house A is sitting there with owners sitting there saying that they would accept 190 for the home, they don’t get the offer because home B looks like such a better value to them at $199,900.  Home B might end up getting marked out at 193 where they could have come over here and bought home A for 190.  The problem is, home A was never in the game.  It never got a chance to participate in the comparison because it looked so much higher than home B.  So home B got the offer.

Now the question is: “But what if they come in there low?  What if that person came in there at 180?”  What if they come in at 175?  It happens every day.  What we do know is 70% of the people that make offers on a home are going to end up buying that home.  Now they may try.  They may make you kind of a low ball to begin with, but if the home is priced right, stick to your guns.  Negotiate a little bit and at some point, you just have to say, “Hey, this is what we’ll accept for the home.” 

You’d be amazed at home many people step up and buy the home because they’ve been around; they’ve seen the market.  They’re emotionally tied to the house.  They made an offer, and chances are 70% of the time they’re going to end up buying that home even though they came in and made you a crazy offer.  So pricing in the market is very critical because buyers compare homes before they make offers.  And they’re going to make the offer on the home that appears to be the best value to them.  If you have any questions about anything, please call us, 867-3020.