When the time comes to sell your home, you have to think about more than its curb appeal, location, and interior décor. You also have to think about the price. If the price is right, you'll have a much easier time finding a willing buyer within your time constraints. If the house price is too low, you could be missing out on an extra zero or two.
To ensure you don’t encounter the latter situation, let’s take a look at three effective home pricing strategies you can use going forward.
What Are the Three Pricing Strategies?
If you’re looking to price your real estate competitively and profitably, there are three broad strategies you can follow: aspirational pricing, market value pricing, and below-market pricing.
At the time of this writing, many markets are still considered seller’s markets, especially in cities like Miami. Due to factors such as decreasing sales activity and increasing inventory levels, a more balanced market is on the horizon. Thus, sellers should reevaluate their pricing strategies sooner rather than later.
Each pricing strategy has advantages and potential downsides depending on the state of the housing market, so it’s important to know when to employ each. Let’s take a look at these three pricing strategies one by one.
1. Aspirational Pricing
Aspirational pricing is a strategy often used in the real estate market to create a sense of exclusivity and scarcity for properties. This approach can be effective for both agents and sellers when implemented correctly.
Agents use aspirational pricing to attract those looking for luxury or exclusive properties. By setting a higher price, agents aim to convey a sense of prestige and limited availability, which can increase interest from potential buyers.
This strategy is particularly effective for unique, historic properties or those located in areas with limited inventory. However, aspirational pricing can backfire if a property remains on the market for an extended period, as buyers may come to the conclusion that it is overpriced.
From a seller's perspective, aspirational pricing can be employed for similar reasons as for agents, but additional factors must be considered.
Emotional attachment to a property might lead sellers to believe their home is worth more than its market value, resulting in a higher asking price. Alternatively, sellers may have unrealistic expectations of market conditions or may not have conducted sufficient research. In such cases, working with a local real estate agent who is well-versed in the market is crucial.
What Are the Benefits of Aspirational Pricing?
One of the significant benefits of aspirational pricing is the potential for more profit. If you do manage to find a buyer for your property, you’ll make much more money than a comparable property with an asking price that is more “reasonable.” What people tend to consider “reasonable” is typically determined through a comparative market analysis or CMA.
If you hit a sweet spot with your aspirational pricing, you can also “bring the market up” with your property by a small amount. This will result in higher prices and could lead to a bidding war if the home attracts enough potential buyers.
When Should You Use Aspirational Pricing?
Generally, it’s smart to use aspirational pricing when you have a unique, very rare property with one or more factors like luxury upgrades that make it more valuable. Alternatively, consider using aspirational pricing in a seller’s market where prices overall are rapidly appreciating (and are expected to continue to do so for some time).
Beyond the market, consider the time of year. Selling prices tend to be higher in the spring and summer months, with August commanding the highest prices. You’ll likely see lower prices during the fall and winter; September is associated with the lowest numbers.
Examples of Aspirational Pricing in Miami Real Estate
Since aspirational pricing is, by definition, hopeful or optimistic, it's appropriate in rare situations when the home in question is definitely worth the higher-than-average price tag, and you can disregard market conditions. You may need to hold open houses or be able to point at factors in the value of your home to pull off a high sale price.
Take this example of a $170 million Miami waterfront compound, which includes three separate homes and a private park. With 600 feet of waterfront space, the Biscayne Bay estate location and privacy make it a prime candidate for an aspirational pricing strategy to attract luxury buyers in the market for an exclusive and unique property.
2. Market Value Pricing
Market value pricing is also fairly straightforward: it's pricing your property at its current market value or thereabouts. For instance, if you have a property that's worth $600,000, that's what you'll try to sell it for, plus or minus $10,000 to $20,000, depending on additions like amenities, curb appeal, etc.
Properly utilizing market value pricing requires a data-driven approach to determining a property’s market value, which involves:
Analyzing recent comparable sales in the area
Considering current supply and demand conditions
Evaluating property features and condition
This comprehensive assessment ensures a property is priced competitively, maximizing its appeal to potential buyers.
What Are the Benefits of Market Value Pricing?
Market value pricing’s benefit is stability and consistency. If you price your property at market value, you’ll most likely get a fair price and find plenty of willing buyers. Hopefully, you have a very easy time selling the property, especially in a seller’s market.
When Should You Use Market Value Pricing?
In most cases, actually. Market value pricing is the go-to, most consistent pricing strategy when selling a house. Consider using this pricing strategy no matter what market you find yourself in unless advised otherwise by your real estate agent (or if there are very good reasons to use a different pricing strategy).
Examples of Market Value Pricing in Miami Real Estate
The majority of successful home sales follow the market value pricing strategy. This example sale of a Miami beach apartment demonstrates why.
The property was initially valued at $1.2 million, then lowered to a little under $1 million. Just from that price action, it went to pending sale in a little less than a week. In essence, the agent and/or home seller corrected their pricing to align with the broader market, resulting in a much faster sale and close.
In most cases, paying attention to broader market signals is the best way to ensure you sell your property quickly and profitably.
3. Below-Market Pricing
Last but not least is below-market pricing. With below-market pricing, you deliberately price your property below its "real" value, given its current condition or other factors. You may sell, for instance, a property that is theoretically worth $500,000 for $400,000 if it needs a lot of work done, such as repairs to the foundations, new paint, and more.
What Are the Benefits of Below Market Pricing?
With below-market pricing, you can get a property off your hands ASAP. That can be advantageous if you don’t want to have to deal with the real estate in question for very long. You’ll also be guaranteed to at least make some money from the sale, even if it’s not as much as you could with another strategy.
When Should You Use Below Market Pricing?
Ideally, you should only use below-market pricing when the property in question would take a lot of time and money to fix up and get to its real market value. You may also want to use below-market pricing in a buyer’s market where it’s very hard to find any willing buyer.
Examples of Below Market Pricing in Miami Real Estate
The classic example of pricing a property at below market value is when you need to sell a fixer-upper.
Imagine that you've come into a rundown property through an inheritance. The property is, on paper, worth at least $750,000. However, it has become dilapidated over time – it needs a ton of work, and its location is decent but not incredible.
Since you have other projects to handle or don’t need the property in question, you want to get the property off your hands. You can likely sell this property for below market value to a house flipper or development company that may wish to demolish the property and use the land for something else. With this strategy, both parties benefit: You by selling the property quickly and the buyer by buying the property at a relative discount.
Which Pricing Strategy Is Best for Homes Under $1M in Today’s Market?
Market-value pricing is the most effective strategy for homes under $1M today, as it accurately reflects the property's worth based on current market conditions. By pricing a property competitively, sellers can attract a wider pool of potential buyers and stimulate interest, often leading to faster sales and better offers.
Working with a realtor who can source current market data is essential, as they can help sellers determine the optimal price based on comparable sales, supply and demand, and property features. This data-driven approach ensures homes are priced effectively, benefiting buyers and sellers.
Which Pricing Strategy Is Best for the High-End Luxury Real Estate Market in Today’s Market?
In most instances, aspirational pricing strategies are effective in the luxury market, particularly for unique properties or those in exclusive areas. However, in the current market, where activity has slowed, aspirational pricing may backfire, causing properties to remain on the market for extended periods and appear less appealing and overpriced.
For those seeking to sell high-end luxury real estate, especially in competitive markets such as Miami, adopting market-value pricing may prove beneficial for securing a faster closing. By pricing your property at market value, you can anticipate increased interest from potential buyers in the coming weeks. Furthermore, this approach is likely to yield a substantial profit, which can be utilized for your next home purchase or investment properties.
How To Find a Home’s Market Value?
There are plenty of ways in which you can find a home’s value if you don’t already know it. For example:
Use online valuation tools. These tools can provide a ballpark estimate of your home’s value based on things like square footage, amenities, etc.
Hire an appraiser. You’ll want to do this anyway since it’s a necessary part of the home-buying/selling process for most.
Consult with a realtor. Their in-depth knowledge may be valuable when pricing or valuing a home that has unique factors, like a unique location, special inclusions, etc. They can also create a marketing plan to attract the highest number of buyers possible, including listing the home on MLS boards.
Check out real estate comps or comparable sales. These can tell you what your house should be priced at, given the cost of similar real estate in the same area.
How To Get the Top Dollar for Your Home
In order to maximize your profits and get top dollar value for your home, study your local market. When you do that, you’ll know the best time to sell and what price to set your property at.
Furthermore, don’t forget how much money it costs to sell a home. You have to consider closing costs and fees for things like inspections and appraisals, which will eat into the take-home cash you receive at closing. If needed, you may also need to do some minor renovations to make your property suitable for prospective buyers, which can further reduce the money you’ll make when all is said and done.
Final Thoughts on Real Estate Pricing
Ultimately, real estate pricing is all about understanding your market, and the maximum amount of money target buyers will be willing to spend. If you understand your property, the nearby housing market, and the state of the economy, you’ll price your house properly and find a willing buyer in no time.
Of course, you can also rely on Vaster for help. Our market insights can help you grasp the current state of the market and also help you understand your options outside of selling your property, such as refinancing or a HELOC.
For more information on how to make the most of today’s market, contact us today.