With house prices increasing across the country, sellers may think they can list their homes at a higher price and adjust if necessary. That may not be a good strategy. This is a post we ran last year by Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit http://realestate.fiu.edu/. - The KCM Crew
The Research
Are there any negative effects from changing the listing price of a
property? This question haunts Brokers/Agents as well as sellers of
property every day. At present, there does not seem to be a consensus
answer to this question within the professional real estate community.
Fortunately, this question was scientifically investigated by John R.
Knight. Unfortunately, few know the results of Professor Knight’s
research.
In Knight, the impact of changing a property’s listing price is
investigated. Additionally, the types of property that are most likely
to experience a price change are also estimated. The findings from this
research indicate that, on average, properties which experience a
listing price change take longer to sell and suffer a price discount
greater than similar properties. Furthermore, bigger price changes are
found to experience even longer marketing times and greater price
discounts. Finally, as for which properties are most likely to
experience a price change, Knight finds that the greater the initial
markup; the higher the likelihood that any given property will
experience a listing price change.
Implications for Practice
Sellers as well as Brokers/Agents should therefore be aware of the
critical necessity of getting the price correct from the start. Sellers
wanting to over list will ultimately take longer to sell and will sell
their property for less, on average, according to Knight.
Brokers/Agents’ desire to take a listing and get the price right later
will ultimately lead to their working harder according to Knight, and
they are not doing their sellers any favors. Thus, an initial and
detailed analysis of the proper price is much more critical than many
originally thought.
Interestingly, I have found in my own research that the direction (up
or down) of the listing price change does not matter. A listing price
increase and decrease both lead to similar results found in Knight’s
work – longer marketing times and lower prices. Therefore, get the price
right from the beginning. It is best for all.
Endnotes
Article & Photo Sourced From: The KCM Blog: http://www.kcmblog.com/2013/06/26/house-sale-price-list-it-right-from-the-beginning/
