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Agerton, Both Buyer and Seller in Mechanicsburg, PA

What are the advantages to a Real Estate Agent pricing a home lower than the comps in the area?

Asked by Agerton, Mechanicsburg, PA Wed Jan 12, 2011

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The first obvious answer would be because the agent want's it to sell quickly. One option may be that it's a short sale and there has to be alot of work done on the home & the seller isn't able or willing to put any money into the home. That would be my guesss....
1 vote Thank Flag Link Wed Jan 12, 2011
This question really depends on how the home compares to the comps in terms of condition and improvements. As most of the other agents have said, regardless of condition low price attracts attention.
1 vote Thank Flag Link Wed Jan 12, 2011
No question about it, the advantage is more interest from potential buyers. Here in Lake Worth, FL, listing agents for REO properties often use this method for getting a property under contract and sold quickly. I have also seen this method used in normal sales when a Seller really wants to sell quickly. Usually it results in multiple offers. Then the listing agent asks each buyer for their "highest and best offer". It's a great way to sell for the right Sellers.

Keith Korpi
Broker Associate
Coastline Realty, Inc.
1 vote Thank Flag Link Wed Jan 12, 2011
U shud read freakonomics. It will help u think differently - out of the box!
I am not an agent or lender, just another buyer.

I think it is tremendous advantage to the listing agent to list below price. It gets the house sold fast, so the agent can focus on other projects.
You also have advantages like multiple offers, bidding wars, qualified buyers, etc.. but the agent also gains.

Example: I would take $2000 for 30 days of work than $2200 for 60 days of work.

If you read that book especially the part on real estate agents, you will understand what I am referring to!
1 vote Thank Flag Link Wed Jan 12, 2011
Agerton
In today’s buyer’s market, buyers can go online and see virtually all the homes for sale in an area along with their asking price, photos, and information. For the same reason you won’t pay $22 for a twenty dollar bill, but you will pay $19 for one, they look for the good deals and ignore the overpriced ones. If you price below the pack you will likely get more interest, showings and offers. We find that when we price houses this way, we are getting multiple offers and selling close to or even above the asking price while the other homes just sit (unsold in a declining market) until their price is reduced. Unfortunately, by then they have the stigma of being stale merchandise and ultimately sell for a lot less than if they were more aggressively priced in the first place.
1 vote Thank Flag Link Wed Jan 12, 2011
The advantage to pricing a home lower than the comps is to sell it quickly (lower days on the market) in a highly competitive market. There are only so many buyers and lots and lots of homes for sale. In our area everyone wants the best deal and often that is 30% under the list price.

On the other hand, all this lower pricing continues to put downward pressure on the real estate market and perpetuates lower and lower home prices. I wonder if a year from now all the people who answered this question will be singing the same tune.

At some point, sellers will say enough is enough. When that time comes we will finally level out and see home prices rise instead of continue the downward spiral.
0 votes Thank Flag Link Thu Jan 13, 2011
Unfortunately the competition for pricing a home 'right' are the REO's in the surrounding neighborhoods, those that are comparable to the listing you are pricing. Depending on the price range of your listing there are many factors to take into consideration and these factors should be shared with your Sellers. Days on market to sold for one, number of price reductions to sold, percentage of the sold price to the listed price, investigation into the condition of the comparable sold; condition of the property (was it without appliances, a total reno, dead landscaping, no utilities on, ETC. you get the picture. Then it is important to instill in your Seller that you don't make the market, your job is to guide them to the ultimate goal....SOLD and your job isn't done until you make it thru the contingency periods and the close of escrow blah/blah. If you price too low, you have no wiggle room and the name of todays game is 'everyone wants a deal'. So it is imperative to not put your Seller into a situation where he doesn't have room to play with the numbers, unless of course their situation is a distress sale, etc.. I price my listings on a by case situation. If they have let themselves get into a pickle then price it below the closest sold comp to your listing. If they have time, suggest a reduction each month until you get good activity and offers. It is important not to forget who you work for, the Seller. You may work harder but you are developing trust and possible future referrals.
Web Reference: http://www.RoseAnneFoxx.com
0 votes Thank Flag Link Thu Jan 13, 2011
Agerton,

In this market you should price it below the comps. You should be 5 - 10 % below the comps. First you neeed to get the buyers attention which is priced right. Then you need to give them good pictures & descriptions. That's how you get them in the home. Then the condition needs to be right. that's how you get offers. There is more to it but these are the basics. The Reo properties are usually priced under & they can receive multiple offers. When people know there is or can be multiple offers & they like the property, they have a tendency of raising their offer. My last Reo offer was almost 22% over list price & cash & it still wasn't high enough.
When you price it at comps or higher, you loose potential buyers that are looking for bargains. If you don't get showings, you can't get offers. Then the comps get lower & you lower your price but not low enough & you still don't get showings since there are other properties that are lower now. You are chasing a downward trend. If you had it priced right to begin with, you would of sold it sooner & for more money.

I had a home I listed that sold above asking price last month. I have a closing tomorrow on another listing that is selling at asking price.
Web Reference: http://SigridGarrick.com
0 votes Thank Flag Link Thu Jan 13, 2011
Great questions! I just did this!....I presented a marketing plan with UNDERPRICING as a positioning key. Put the house on the market January 3rd. We had 12 showings in 6 days. 50 families came to the open house last Sunday. We had 4 offers, 2 of which were above asking! The key was the condition of the house.. it was spotless, updated, fresh and move-in condition! Everyone is talking about this, as these results are stunning. My seller was worried about waiting until Spring, when the property looks its best. I said, "If you want to sell don't keep it a secret!". If you want to see this listing, go to my website, wwwpropertiesbybarbara.com and click on 1 Mooney Lane. Be sure to watch the video! Call me to show you properties in the greater metrowest Boston area!
0 votes Thank Flag Link Thu Jan 13, 2011
An agents job is to get the seller good value and it should be priced competitively but not to low that the agent makes a quick sale and the seller gets short changed!
0 votes Thank Flag Link Thu Jan 13, 2011
It's a progressive decision and generally works. Every buyer seeks a better price for the product and unfortunately wants to feel they got more for their money than expected. In a market where there are millions of homes for sale, some new construction with nice incentives and some old with a hint of being updated. I sold my personal property in DC during the beginning of the down trend for $15,000., less than the other units in my sub-section and it sold in 11 days. Of course, I could have used the extra money, but, my mission was to sell quickly and I did.
0 votes Thank Flag Link Wed Jan 12, 2011
The better the price the faster the sale. A home priced well will sell quickly and for close to asking price. A home asking a higher price will take longer and require the seller to negotiate lower.
0 votes Thank Flag Link Wed Jan 12, 2011
Agerton,

The responses for this question are overwhelming and as I am sure after you have read them you are getting the idea, lower than comps=more interest.

There is one catch if it is to low and the buyer needs to use FHA financing the home may not appraise and the deal may fall apart. In a perfect world, 5-10% below will get you back in the middle of the comps!

Great Questions and Great Answers!
Web Reference: http://jeramievaine.com
0 votes Thank Flag Link Wed Jan 12, 2011
The lower you price it the more attention it will get! The more attention it gets from the market the quicker it will sell! When a home is listed aggressively it often gets so much attention that multiple offers come in! That is always a great thing. If you are looking to sell fast this is your method!

For more seller and buyer tips: http://www.RochesterHomeLocator.com
0 votes Thank Flag Link Wed Jan 12, 2011
The ultimate benefit would be to the home seller in need of a quick sell. The sooner you can close the sooner you can get your equity out of this property. The other reason would be in a seller's market ( where their are more buyers than sellers ) would be to start a bidding war. Start low and see how many offers are received to see what kind of adjustment is being made to the market
0 votes Thank Flag Link Wed Jan 12, 2011
This creates excitment with buyers agents and get immediate attention for the listing, which could result in multiple offers or a much quicker sale.
0 votes Thank Flag Link Wed Jan 12, 2011
Buy pricing the home below the comps in the area you will increase the exposure of that home to the greatest number of buyers. The likelyhood of multple offers will be increased and the home will normally be sold at very close to the actual market value of the home. At the same time the number of potential buyers for the agents holding Open House will also be accomplished.
0 votes Thank Flag Link Wed Jan 12, 2011
First and foremost the home will get alot activity and be more competitive. The best priced homes will get shown first. If you have 10 similar homes and your priced in the top three or five, you will get more showings which will eventually lead to a sale.
0 votes Thank Flag Link Wed Jan 12, 2011
To sell the home FAST....with that you get multiple offers and even selling at a higher amount. Now you seller is super happy and guess what? REFERALS!!!!!!
0 votes Thank Flag Link Wed Jan 12, 2011
Good answers below. However, let me approach it from a couple of different angles.

First, how much "lower than the comps"? 5%? 10%? 20%? Something a bit below the comps--say 5% or so--is likely to produce more interest, more offers, and yet result in a net to the seller close to (or sometimes, though not often) equal to what a home priced in the middle of the comps might have brought.

But if you're talking about, say, 20% below comps, you likely will net less. Also, you may actually not get more interest or offers. First, a lot of folks will figure there's something wrong with the house. Second, buyers look in "bands" or "ranges." Maybe someone will be looking in the $175,000-$200,000 range. Price your home at $149,000, and you'll miss those buyers entirely. It'll be a different type of buyer who likely doesn't value your home the same way someone from a more expensive band would.

You asked specifically what the advantages are to a real estate agent pricing the home lower than the comps. The advantage to the agent is a quick sale and, thus, a quicker commission with fewer marketing expenses.

Hope that helps.
0 votes Thank Flag Link Wed Jan 12, 2011
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
Contact
If the comps that your Realtor is using are accurate, listing your home lower than the comps can give you an advantage over the comps. You should have more showings, offers, etc., and should sell sooner, provided that you lower your listing price as often as your competition does. In addition, for all of this to work, your lower listing price needs to be significant for the market you are in.
0 votes Thank Flag Link Wed Jan 12, 2011
As a listing agent, pricing just below the comps will make your listing much more competitive, and buyersb will want to see the lowest priced home first (that meets their criteria, of course). Also, here in Palm Beach County, at least, we are still in a declining market - so pricing just below the comps will help with the appraisal once it comes time for the new buyers to get a mortgage.
Anna Losito
Licensed Realtor
Specializing in Palm Beach County, Florida
561-662-5400
0 votes Thank Flag Link Wed Jan 12, 2011
leads, leads, leads...and more leads. Is what the realtor gets.
0 votes Thank Flag Link Wed Jan 12, 2011
It's no secret that in a buyer's market, pricing a home correctly is critical. Often seller's need to move quickly to relocate for a job, health problems or to purchase another home and take advantage of current low prices. A buyer's market requires justification of price and there's no better way to get interest, showings and eventually an offer by beating the competion in price. Seller's worry too much about buyers always making offers below the listed price. So What! Let them. There's no law that says you must accept the offer. What's the problem with selling at full price whae you have already listed the property at a bargain.
0 votes Thank Flag Link Wed Jan 12, 2011
Agerton,
Not only is it an advantage but pricing below the comps is the more correct number than the comps. We are still in a declining market so using comps to price your listing you are behind the curve. Recently sold homes were under contract at a price 60-90-120 days ago so in a declining market you should be somewhat below those numbers.

A personal example; We put our home on the market it was in super excellent condition freshly painted in & out landscape top notch model home ready. We priced it a little below the market price based on an apprasial and 2 agent comps. Listed the home in the MLS made it easy for agents to show had 12 showings in 9 days. Signed a contract on the 10th day and closed 25 days later. Price came in about $12,000 less than what we wanted we spent $3,000 into getting it ready and that was OK because I knew we could make it up.

On the Buying side we searched every "short sale" & "foreclosure" in our area in price ranges twice as much as we could afford. The idea was to negoiate the price down to what we were motgage approved to buy. After 2 weeks we had a bank approval on a short sale where the bank took $325,000 less than what was owed on the house. The apprasial came in even $100,000 higher. We got a big deal on a move-in ready lake front new construction home with all the bells&whistles. Thank you,

Bill Carey, Broker/Realtor
Certified Short Sale Seller Specialist
Cell 704-905-0740
Fax 866-343-5945
Bill.Carey@HendersonProperties.com
http://www.HendersonProperties.com

Henderson Properties
Charlotte's Premier Real Estate Company
0 votes Thank Flag Link Wed Jan 12, 2011
Hi Agerton,

Well certainly pricing a home lower than the comps will give a seller a leg up on the competition provided all things are equal..which means is the view and upgrades in the home comparable to the comps being used. Not all homes are created equal which makes it challenging when using the comps--it is important to ensure that the things that are important to buyers like the condition of the home, upgrades and views match up. Provided all things are equal to the "comps" then pricing it below those comps will definitely make it stand out in a buyers mind.
0 votes Thank Flag Link Wed Jan 12, 2011
Should put your home at top of buyers list as long as what you offer has at least as many amenities as the competition.
0 votes Thank Flag Link Wed Jan 12, 2011
All of the answers so far are based on the assumption that you are talking about the house that you are selling. The answers also can be applied to a house that you may be thinking about buying. Why would that house be priced below comps? To generate offers. Will the seller take an offer that he/she deems is too low? Probably not. The seller does not have to accept an offer that is too low even if it is a full list price offer. Under pricing is a strategy that can be effective but is not guaranteed to work. If all the offers come in too low but even at full list price, what will the seller do?
0 votes Thank Flag Link Wed Jan 12, 2011
To give the buyers a great sale and get property sold. It's a win-win situation.
Mary Curtis
CA Broker 00408866
Chaseinternational.com
0 votes Thank Flag Link Wed Jan 12, 2011
It all depends on how quickly you wish to sell your home, as well as the equity you have in it. If you have enough equity and want to sell quickly, it can sometimes work to your benefit to start with a lower asking price. When compared to mortgage payments over a longer listing period, you may realize the same or a higher net from the sale of your home. This assumes your home is in good showing condition and theRealtor makes sure the representation is that the home is priced for quick sale.
0 votes Thank Flag Link Wed Jan 12, 2011
Among the most common answers to the question, one that sticks out in my mind from very recent experience, is that you may actually get MORE for your home than you originally listed it for. Within the past 3 - 4 weeks, I have been involved in 3 bidding wars over properties in Hoboken, NJ. All of them were priced very well, and the comps sold in the same building were higher than the listing price. In all cases, there were more than 3 offers, all within the first week of listing and they went to highest and best right away. I advised my client to go higher than the listing price the first 2 times, and not until we lost both, were they willing to give it a try on the 3rd property....and they got it! The homes all sold for what would be considered fair market value, but if they had been listed higher, they would probably still be on the market. The lower price defiantly attracted the attention of the serious buyers, and got the offers in fast!
0 votes Thank Flag Link Wed Jan 12, 2011
Hello Agerton,

Marketing your home lower than the comps in the area will certainly give you an edge over the competition. There are plenty of ways to lose money in a real estate transaction and carrying cost is a big one. I am not in your market area but if it were me I would rather sell my home quicker than pay the extra mortgage payments to get a higher price. You will have to evaluate your situation. Are you living in the home while it is up for sale etc.
0 votes Thank Flag Link Wed Jan 12, 2011
A lower price will bring more viewers but you can just be assured that the offering price will be less than the list price so make sure you know what your property is really worth in your market.
0 votes Thank Flag Link Wed Jan 12, 2011
Hello Agerton! You have gotten some great advice in these responses. Location, condition AND price all come into play. What a home sold for in your neighborhood a year or two ago cannot be compared with the current Buyer's market. Marketing a home is abig plus and I. Would be happy to show you what my compny and I could do for you in not only selling your present home but also helping you find your new home. Good luck!
0 votes Thank Flag Link Wed Jan 12, 2011
Assuming that you are working with a thorough and thoughful pricing analysis, pricing lower than the competing properties is certainly worth considering. I generally identify a range for the seller to consider - there will be comps all along that range - pricing at the low end or just under will cause your property to "pop" among comparables. I advise sellers to consider the very real possibility that there will be just one buyer that you and others will vie for - your goal is to capture that buyer. Price is THE primary driver in the market today and so it is critical that you position yourself wisely vis a vis your competition. The objective of being the best property at the best price is a winning strategy. The market will respond with a market price - your pricing will determine whether you as a seller get the opportunity to play ball. Price aggressively - it is a very smart thing to do, and do it right out of the gate or correct quickly if you miss the mark. The excitement - and interest - for your home is greatest in the first 45 days and then, statistically, falls off dramatically after.

Good luck to you!

Best,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Wed Jan 12, 2011
Agerton,
I see no advantages to ever under pricing a home unless there is a need to sell quickly and there is an advantage for the seller to do so. Perhaps you are buying another home and need to sell quickly. you question pertains to a Realtor under pricing a home. It is more important that a home is priced correctly. The market will dictate the how well priced the home may be.
I'd like to focus on the disadvantages. That would be if the home is worth more, has location and is in very good condition, I would suggest pricing it right. Anyone can sell a home if it is priced too low. The outcome is that other sellers will follow suit and this brings the value down in a subdivision or given area. Please let me know if you need any help selecting a realtor in your area. I have extensive resources to help you pick the top broker/agent in any given area and have referred dozens of buyers and sellers outside my area with great success. Good luck in your endeavor.

Frank Dolski MBA, ABR, e-PRO
Associate Broker
CARTUS Certified Relocation Specialist
Previews Luxury Home Specialist
Coldwell Banker Hearthside Realtors
215-803-3237 (mobile)
215-794-1070 x-103
f.dolski@cbhearthside.com
http://www.FrankDolski.Com
Web Reference: http://www.FrankDolski.Com
0 votes Thank Flag Link Wed Jan 12, 2011
Price and photos sell property in Oklahoma and I bet that applies every where.
0 votes Thank Flag Link Wed Jan 12, 2011
I am a Realtor in this zip code as well as a resident. A lower than comp price in this area will have the possibility of receiving multiple/competing offers and sell quickly. It takes guts for a homeowner to trust the professional they hired at pricing their home aggressively and not to "give away" their home. The goal is for it to pay off by providing you a faster sale at a higher price because when your home is on the market too long, many times because it was overpriced to begin with, statistics show that the home sells at a lower price than it would have at the beginning of its listing life had it been realistically priced. I tell my clients that you need to sell your home to three people in order to get to the closing table: 1st to another agent (usually not your listing agent) who feels it is priced well enough to bring a client through; 2nd to a buyer who likes your home but won't take the chance on writing an offer if they feel it is priced too high and just on the market--they're going to say let's watch it come down; and 3rd to an appraiser who needs to appraise your home at or above contracted price so the buyer can get the loan. If you have an offer on a home contingent on your current home to sell, I recommend you do just as the agent says.
0 votes Thank Flag Link Wed Jan 12, 2011
While there are similar trends in the market throughout the country, I strongly suggest talking with a reputable Realtor that is local to your area. In a typical listing agreement with a real estate broker, you won't be obligated to accept an offer less than the asking price ---- so the risk is minimal. Again, discuss the pros and cons with your *local* Realtor.

The "wiggle room" that so many people try to build into their asking price, in my opinion, is not needed and delays the inevitable. If the marketing is sufficient to attract real Buyers and it is priced right ---- they'll pay for it.

There is short article I wrote which addresses length of time on the market in your location. Check it out. The link should be included in this reply.
0 votes Thank Flag Link Wed Jan 12, 2011
With so many properties on the market at this time to strategically price your property lower than compareable properties will certainly give you an advantage, and at the very least get you showings. In contrast pricing your property above the compareables could lead to your property being passed on for others and in this market staying ahead of the market which will affect a quicker sale is the way to go.
0 votes Thank Flag Link Wed Jan 12, 2011
Hello Agerton,

I am not a Realtor but I am a realist. The property market is filled with distressed properties (short sales and foreclosures) and overpriced properties that have sat on the market for too long.On top of that lenders are aggressively denying loans at every opportunity and also we are in a time of a depressed and uncertain economy. Therefore we have high supply and limited demand. If you want to sell the property price it aggressively. If it is undervalued, you will see aggressive bids on the property.

Best Regards,
Alan Openshaw
Cornerstone Lending Inc
720 Second St Pike Suite 104
Southampton Pa 18966
Office 215 953 0800
Fax 215 953 1706
Cell 267 992 7276
Voted Best of Bucks 2010
0 votes Thank Flag Link Wed Jan 12, 2011
The advantage is that your property will more than likely sell fairly quickly and close to asking price. That being said you need to be sure that it truly compares to the comps. Sure we can look at Sq ftg, number of beds and baths, but what might have been missed is upgrades and overall condition. If your property is missing some upgrades and such you might just be priced right. Better to be priced well even if it is a little below comps if you really want to sell that home in this market. the buyers will soon tell you about your price by the offers and activity you see. Remember in the end it's up to you wether you want to accept the offer or not.
0 votes Thank Flag Link Wed Jan 12, 2011
There are several advantages and only one disadvantage I can think of. The disadvantage is that it will not yield an offer above the listed amount no matter how long you wait for it.

The advantages are that it will attract more buyers and agents that will come to see your house. It will show your willingness to aggressively market your house and lastly it will likely be why your house sells and the others on your street sit and generate long times on the market unsold.

If you have all the time in the world to sell, then don't price aggressively and wait for the one buyer who just has to have your house.
0 votes Thank Flag Link Wed Jan 12, 2011
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