What price the house should be listed for is often a point of contention between the parties. When there is conflict, it can be tempting to insert a price in the order so that the list price issue - is no longer an issue.
At some point, the order’s stipulated list price makes its way into the terms of a listing agreement, and depending on when and how that price was determined, it could hinder or hurt the sale. Here’s why:
1. List prices are strategic Most buyers search on consumer sites like Zillow and Redfin. As they search, there are bracket pricing options - dropdown tabs where they search, for example, from $600,000 - $650,000, based on what they qualify for and can afford. If a property is listed for $599,000, the property does not appear in their results and we eliminate the entire buyer pool who are searching for $600,000 and above. A fixed price in an order can hamper exposure and a good Realtor knows what the neighborhood “caps” are for these brackets.
2. Prices are fluid. A value that was established last month could be obsolete, especially in an increasing or a decreasing market. Maybe there was an appraisal done a month ago indicating a $750,000 value. And then last week, three comparable houses on the block sold above $800,000. Worse yet, the market takes an abrupt turn and the comparable houses sold for less than $700,000. With new stats coming out daily, we need to have the flexibility to keep up with the market on a real-time basis, or we get left behind.
3. Lifestyle and intangibles affect the value.
Have you ever walked into a house with an overwhelming pet odor? Perhaps the downstairs has been turned into an at-home daycare center. Or, tenants living in the house are rude and off-putting, making buyers want to turn around and leave the moment they step inside. When buyers are house-shopping and looking at 5-10 houses per day, these factors all of a suddenwant to turn around and leave the moment they step inside. When buyers are house-shopping and looking at 5-10 houses per day, these factors all of a sudden put our house at the bottom of the list - and diminish the value significantly. We need the latitude to adjust the price accordingly.
Another problem is having built-in price reductions in the order. “The price is to be reduced by 5% every 90 days” for example. When the average days on market is less than 10, an overpriced house that sits for 90 brings out the vultures and barrel-bottom, low-ball offers are all we are left with. Terms like this can plummet a value by tens of thousands of dollars.
Best practice is to either leave the list price up to the recommendation of the Realtor or consult with the Realtor before creating the order so that the price is relevant and allows flexibility.