There’s no question that pricing is the most important factor when it comes time to list your home for sale. The list price you choose affects your sale price and how long it takes for your home to sell. It’s no wonder so many people ask me “What’s your pricing strategy?”.

The fact is, I don’t have a single pricing strategy. I’ve never been a one size fits all kind of guy. I’m more of a bespoke pricing strategist. Every situation is different, which is why every pricing strategy is custom tailored to each client’s particular situation. Having said that, you should still be aware of some of the common pricing strategies you’re most likely to hear about:

• List extremely low and hope for multiple offers: This strategy is often used in hot markets. The thinking behind it is that if you list below market value, you’ll generate more interest which will lead to multiple offers which will hopefully produce a high sale price. But this strategy is not without its risks. What happens if you don’t receive multiple offers and are stuck with your low list price? Yes, you can always raise your list price, but is that really the image you want to project to the market? (For the correct answer to this question, read Pricing Madness). Or what happens if you do receive multiple offers, but the highest offer is still less than the market value of your home?
• List high, keep the price high and hope for an uneducated buyer: This strategy is most often used by sellers who believe their home is worth more than its fair market value, sellers who have no deadline by when they must sell or sellers who aren’t motivated to sell, but will sell if they receive “their price”. Their hope is that an uneducated buyer will come along and pay them an inflated price. Once in a while, this kind of buyer does come along, but in this day and age when so much information is freely available, that doesn’t happen very often. More times than not, this seller’s home sits on the market and either doesn’t sell until the price is reduced or doesn’t sell at all.
• List high and reduce the price until it sells: This is an acceptable strategy, in my opinion, when your home is so unique that that you can’t accurately estimate its fair market value because there really are no comparable sales. By using this strategy, you avoid the risk of underselling, but you run the risk of buyers not paying attention to your home because its price is too high. Remember, you only get one chance to make a good first impression.
• List at or just slightly below fair market value: This strategy encourages a fair amount of interest in your home because of the attractive price. If you sell at list price, you receive fair market value. If you get lucky and receive multiple offers, you might even receive a premium price.
• List slightly higher than fair market value: This is a good strategy to use when you’re unlikely to receive multiple offers because the market is a little sluggish or because homes like yours aren’t the subject of bidding wars. In these cases, buyers expect you to negotiate a little so it’s good to leave yourself some room to do so.

As I mentioned above, I don’t believe a one size fits all approach to pricing does you any justice because every situation is different. Homes like yours may be selling quickly and with multiple offers in April, but what happens if you need to list in June? Should you still use the same pricing strategy? It’s true that the same pricing strategy might be appropriate for similar homes being listed at similar times, but you at least need to establish these similarities before adopting the same pricing strategy. Question anyone who tells you that the same pricing strategy works all the time. They either don’t know what they’re talking about or they’re too lazy to do the analysis.

Before you determine the best pricing strategy for your home, you need to know the following information:

• What’s the fair market value of your home?
• When will you be putting your home on the market?
• What do you anticipate the market being like at that time?
• Is your home type common for your neighbourhood or is it unique?
• Do you need to sell or close by a certain date?
• What type of pricing strategy is most commonly used in your neighbourhood?
• What kind of pricing strategy do you think buyers will expect?
• Are you willing to take the risks associated with certain pricing strategies?

Like almost all aspects of your real estate transaction, it pays to go in with your eyes open and knowing your options. Now that you understand the basics, it might be time for you to check out Understanding Prices – Master Class.