Inside Real Estate: Example Listing Price Scenarios

Last time I talked about choosing a listing price and said we'd look at two examples that point out the tension between selling your house quickly and getting as much money as possible from your house.

In example 1, the wish is to sell the house as quickly as possible. Let's say that you want the house sold in the next hour. We could list it at $100. Somebody would pay that. If you priced your house at an astonishingly low price, it would increase the chances that someone would hand over the money and buy the house on the spot. You could even say that the land without the house itself is worth at least $100. You would achieve your goal of selling your house as quickly as possible by ignoring your wish to get as much money as possible.

In example 2, the other wish is to get as much money as possible when selling the house. Let’s say you want to list the house for $5,000,000, which is probably nowhere near what you paid for it. How long do you think it would take to get the house sold for that price? In most cases, the house would be on the market until all the other houses are sold and someone really needed a house to live in. If there were no other houses available to be sold & someone really wanted to buy a house, they could pay five million dollars and buy yours. It may take many, many years for that situation to happen, but you would have achieved your goal of selling your house for as much money as possible by ignoring your wish to sell your house as quickly as possible.

Hopefully, these examples show you that there is a direct relationship between price and time when it comes to selling a house. Of course, you wouldn't choose something as extreme as either of these. But you can see how you must balance speed and money. The lower the listing price, the sooner it will probably sell, but the less money you will make from the sale. The higher the listing price, the more money you will probably make from the sale, but the longer the house will be on the market.

You tell the buyers a lot about your intentions with the initial listing price of the house. And you tell them even more by the changes in the pricing as the house remains on the market. As a general rule, it makes more sense to not start selling the house until you're ready, and to list it at the most reasonable price you can afford.