How to price a home in a hot market

Protip: it's not as simple as some people think.

  • 3 mins read
  • June 8, 2019

The rest of the United States is now catching up to a reality that all Tacoma residents have known for some time: it’s a very hot market here. Apparently, we’re America’s hottest market now! As I have written previously, this varies extensively by region, community, neighborhood, and market segment/property type. Even in our “hot” region, is is currently a buyer‘s market in places like Anderson Island, for example. Whereas in some areas like North End Tacoma, many properties under $500,000 are routinely off the market with multiple offers in less than a week. It all varies.

A seller’s market, however, does not in any way mean that sellers will automatically have an easy time, or can somehow act with impunity towards market forces. Those fast marketing times only apply to properties that are accurately priced and competently marketed. An over-priced property with cell phone-quality MLS photos will still flounder on the market for days, weeks, or months without offers until:

  • The price drops to its market value, and/or
  • The condition and presentation improve to a standard expected by typical buyers in that segment.

Basically, it all comes down to conformity. If properties like yours tend to sell quickly with multiple offers in your neighborhood, your pricing strategy should serve that goal. In most cases, this involves a determination of what a typical buyer would pay for your house…and then pricing a little under that.

That may sound completely counter-intuitive. But having multiple people bid against each other for your house vs. a single buyer not only tends to drive the final sales price higher, but it empowers the seller significantly from a negotiating standpoint. You not only have the choice of the highest offer, but you also have far greater leeway when it comes to important terms like inspection timelines, what happens if the house appraises low, repairs or improvements demanded, etc. Whenever possible, it’s best to have a mob of people fight each other for your  house rather than only deal with one party. Your initial listing price should be geared towards generating that scenario.

Another factor in properly marketing a property is market exposure, or how many people actually see the property. One way to maximize the exposure of your house is to “price on the bridge.” The overwhelmingly majority of today’s buyers search for houses on their phones via Redfin, Zillow, Realtor.com, and other similar websites. When they enter price ranges, they tend to split them up by even increments of $25,000, $50,000, or $100,000. Like “homes between $250,000 and $350,000.” No one searches for houses starting at $299,999. So if you suspect your house is worth $320,000, it may be wiser to price evenly at $325,000 or even $300,000. That way people searching on both ends of the price spectrum will see your house – doubling your exposure.

In conclusion, hot market conditions certainly work to your benefit as a seller. But they do not immunize you from exercising common sense, or from listening to sound judgment from a real estate professional. If you’re ever curious about what your home might sell for in today’s market – even for informational purposes – I’m always available!