In this week’s MAJ 101 series, we answer the age-old question…what’s up with the list price?
It’s a well-known phenomenon here in the East Bay. A home is listed for $X and it sells for 30% over the list price. During the height of the spring 2022 market, some homes sold for nearly double the list price! Leaving most homebuyers befuddled.
Here’s what you need to know:
- The list price is not a reflection of value. Unlike the market value - defined as what a buyer is willing to pay for a home - the list price is not a valuation tool. It is a marketing device. Divorce the list price from a signal of the value of the home, and suddenly it makes sense.
Home buyers start their search online. And most online shoppers begin by setting parameters on their search. Think: number of bedrooms, location, and price. If a home is listed for too much, it won’t even show up in the home seeker’s results or feed. And the first step to selling a home is sharing it with the target market. If the right audience doesn’t ever see the home, they clearly won’t go through the effort to drive by, visit an open house, review disclosures, and make an offer.
So, the first step for any listing agent worth their salt is to make the available home show up for the likely buyer. And a well-priced home will do just that!
- The agent matters. The top listing agents are known for their approach to list price. Some are known for listing artificially low and others for listing closer to the seller’s expectations. If you are working with a well-networked local agent, they should guide you on the expectations based on who listed the home. Additionally, a top local agent will be able to pick up the phone and call the listing agent for guidance, assisting you in your strategy as a buyer.
- No two homes are the same. Some buyers ask us in their search if they should just arbitrarily add 25% to any list price. The answer is “no” - while that sort of transparency and consistency would be lovely, the truth is that each home is deserving of its own list strategy. You might find that some houses that are well-located, have universal appeal, are prepared well for the market, and are quite popular are listed low. These homes tend to sell for significantly over the list price.
But a home that has a complicated home and pest report, is aged and has deferred maintenance may sell with a “transparent” price. In other words, the list price matches the seller’s expectations.
Working with a stellar local agent is the best way to divine the true market value of a home. Don’t let frustration set in, instead reach out to your trusted advisor for guidance on where to list your home, and where to begin your search!
