Posted: 03 Dec 2012 04:00 AM
PST
With the housing market showing
signs of a recovery, 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
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