Real Talk: Goldilocks and the three pricing strategies

Real Talk: Goldilocks and the three pricing strategies
Photo/BTW Images Finding the right price strategy for your home is often based on using comps, sales data on similar homes near yours which recently sold or were listed.

By Elizabeth Lucchesi

Once upon a time, a little blonde girl used trial and error to find a bowl of porridge, a rocking chair and a bed that was just right for her. Let’s hear it for Goldilocks. She made it look simple – the act of weeding out “less than” choices to land on a perfectly suited solution to her various challenges.

Goldilocks mastered the art of finding “just-right” solutions, and today’s home sellers could learn a thing or two from her. Goldilocks knows what houses sell and what houses don’t. Goldilocks is what we call “discerning.”

Pricing a house can be boiled down to three strategies that ring true in bull and bear markets. The fundamentals are quite simple. The cutest kitty in the litter for the right price will get a great offer. In other words, when the sales price of a home matches its condition, even in a slightly less rapid-paced environment, that home will likely sell at list price and satisfy all the terms and conditions outlined by the seller. Imagine Goldilocks is interested in three homes, each priced using one of the strategies below. Let’s discover which one is priced just right for her.

Aspirational pricing

Aspirational sellers set their pricing using arbitrary sales activity on their street, condominium community, submarket or zip code. The pitfall of this approach is that it ignores their home’s actual condition and can lead to pricing above market value. An aspirational seller may lose Goldilocks’ attention with the high-water mark pricing. Aspirational sellers can expect their home to be on the market longer than average and likely sell for less than list price.

Fair market pricing

Though this strategy sounds squared away and simple to calculate, it doesn’t define a formula for determining the market value of a home. Market trends, buyer and seller terms and the involved parties’ desire to buy or sell all impact the fair market value of a home. This means fair market value is not always synonymous with what a home is worth. From 2019 to mid 2021, this strategy hit the mark and we witnessed fairy tale-like appreciation with every house sold. Goldilocks submitted an offer for one or two of these homes, but it wasn’t as competitive as the others, and she lost out. She is a little down on the process.

Just-right price

The “just-right” price for a home is one that ensures it will sell without lagging. Sellers, guided by the insight of a great realtor, will use “comps,” industry shorthand for sales data on similar homes near yours which were recently listed and/or sold, and other relevant market trends to determine the “just-right” price that will have buyers chomping at the bit. Just-right prices tend to be a smidge under fair market value – one that disrupts the market and captures buyers’ attention.

The bottom line

Properly pricing a listing is no fairy tale. This process is a collaboration between sellers and their realtors working arm in arm in the service of the seller’s goals. Pricing is not playing online target practice with these automatic valuation models, leaving 8 to 13% of the sales price on the table in the process. It’s real-life, real-time pricing.

Buyers are watching, and they continue to become experientially educated. They’re still eager to lock into low interest rates. Though, they are indeed fatigued by losing out on offers or even hearing about others who have lost or paid tens of thousands of dollars over list price, waiving all contingencies.

The right listing agent should be able to consume and interpret marketplace data to meet their sellers’ needs. The right listing agent should guide you to the settlement table without sacrificing your bottom line.

The writer is the founder of the LizLuke Team of Long & Foster Real Estate. She is also a buyer and seller agent.