Accurately pricing a home initially to avoid price reductions is the most lucrative strategy.
Initial Pricing: Sellers who price their homes accurately and avoid price reductions sell their homes for more.
After their own personal pre-race ritual, the sprinters approach their designated starting blocks. The starter raises the pistol into the air stating, “On your mark.” The runners carefully place their track spikes onto their blocks. After everybody looks ready, the starter then utters, “Set.” The athletes get in the loaded position and their legs are ready to fire. Finally, the gun goes off and they explode onto the track. Ultimately, somebody does not have a good start. Some delay. Others do not have the proper form. The initial start is crucial and is an advantage that often propels the athlete with the best start across the finish line with arms raised high in the air.
Similarly, when a home initially comes on the market, the price will determine whether or not a seller will be raising their arms in the air with delight as they successfully close escrow. Buyers today do not want to pay much more than the most recent closed sale. Prices are a lot stickier. The days of rapid appreciation are now in the rearview mirror. Overpriced homes sit without success. Throwing a price out there just to test the market is not a wise strategy. Instead, carefully and methodically pricing a home is vital to cashing in on the Golden Opportunity, the first few weeks after coming on the market.
It is very telling to look at the sales price to last list price ratio. This refers to the final list price prior to opening escrow. In Orange County, 68% of all closed sales in June did not reduce the asking price at all. The sales price to last list price ratio for these homes was 98.9%, meaning, on average, a home sold within 1.1% of the asking price. A home listed at $600,000 sold for $593,400. In addition, 20% of all closed sales reduced their asking prices between 1% and 4%. The sales to list price ratio for these homes was 97.8%. A home listed at $600,000 sold for $586,800. For homes that reduced their asking prices by 5% or more, 12% of closed sales in June, the sales to list price ratio was 96.6%. A home listed at $600,000 sold for $579,600. Everybody would agree that closing for $593,400 is a lot better than $579,600.