I recently had a buyer who was looking through the listing collections that he gets every day from me. He noticed that instead of a price reduction, a seller had actually increased the list price for his house. My buyer was wondering why would someone do that?
I explained that real estate is a people business, and you meet a lot of different people. Some of these people have their own world outlook and may not do what you or I might think would be the best course of action. I too was curious as to why the seller raised the list price of the house, so I gave their agent a call.
The agent said that they had gotten a good initial response when the house was first listed and the seller was afraid that he was giving away too much with the lower list price and he wanted the buyers to know that he was serious and that given the other interest in the house, that they should pay more and so the list price had to be raised.
While this approach seems logical, it won’t get you the highest sales prices and might even get you a lower price than had you left the price at the lower list price. The problem with raising the price is that it pits the seller against the buyer and what you want to have is the buyer against the other buyers, i.e. a multiple offer situation.
Raising the price reduces the number of people that have the funds to buy your house, albeit marginally, but what it does more is tell the buyer that you as the seller will be hard to deal with.
There are situations where raising the price makes sense. If you have done a lot of work to address the issues that prior buyers had complained about such as opening up the whole first floor to make a modern open floor plan, that can be a reason to raise the price. You just need to make sure that buyers know that the price went up, because you have enhanced the value of the house.
Another time that raising the price is required is when the decimal place is in the wrong place. An agent can be sure that if they put the house on for $80,000.00 rather than $800,000.00 that one of their fellow agents will let them know, if not some eager out of town buyer.
Raising prices is not common. Over the last year, we have had 656 listings; 150 are still active, 86 are in contract, 419 have sold and the rest have expired or been cancelled. Of those 656 listings only 7 have had price increases and 5 of those are still active.
It doesn’t happen often, but it’s almost always an interesting story when it does.
