Counting the Cost: The Counterintuitive Results of Incorrect Pricing

There is a critical difference between the objective value of your home and the price you will end up getting. Value is the home's real-world worth, supported by market data. Price is simply what a buyer and seller agree upon at a moment in time. Values are data-driven. Prices are discovered. Prices only become values, part of the data, after a sale is closed.

Pricing to Achieve True Market Value

The objective value of real estate can be established with market-supported data. The price that a buyer will actually pay is discovered through the open market process. Assuming the goal is to obtain the objective fair market value of a home, the primary question faced by homeowners and real estate professionals is how to price a home accurately to achieve this end.

Buyer Psychology: Why Overpricing Backfires

Everyone knows buyers love to get a deal, and therefore the tendency is to list higher than the fair market value range and assume a buyer will lowball. This thinking betrays a fundamental misunderstanding of buyer psychology. Buyers love to get good deals and make lowball offers on properties they perceive as overvalued. However, if a property is priced within the fair market value range it will attract the attention of one or multiple buyers.

How Overpricing Shrinks Your Buyer Pool

Overpricing does not reduce the fair market value of your home; it reduces the number of buyers willing to pay that fair market value. And a smaller buyer pool produces lower offers, which is why the final sale price often ends up below where fair market value should have been.

Three Pricing Scenarios: Low, Right, or High

Here's how it plays out in practice: List too high and you get fewer buyers, reduced competition, and a lower achievable price, even if the actual value is higher. List accurately and you attract more buyers, stronger competition, and a higher achievable price closer to true value. List too low and buyers push upward only if competition exists. The data in Douglas County confirms this pattern consistently.

Douglas County: A Stable Market Snapshot

Stability is the new, old story. Just take a glance at the market charts and it's clear nothing dramatic is happening very quickly in the local real estate market. Prices are stable. Inventory is increasing, albeit at a very slow pace. Mortgage rates are stable. New listings are stable. Pending sales are stable. The tension between supply and demand is in a state of relative equilibrium. It's basically been the same for the last 24-36 months. In one sense, it could continue for another few years. But the shoe could finally drop and the pendulum swing strongly in an opposite direction. A lot will depend on the health of the economy over the next 2-3 years.