Strategic Home Pricing: 3 Approaches That Get Results

The Make-or-Break Question in Real Estate

When it comes to selling your home, countless factors influence your success. The quality of your listing photos, the timing of your sale, your home's condition, and even the weather on your first open house weekend can all play a role. But there's one factor that outweighs them all: your pricing strategy.

Notice I didn't say "price" – I said "pricing strategy." There's an important distinction here that many homeowners miss. A price is just a number. A pricing strategy is a thoughtful approach based on market data, buyer psychology, and your personal circumstances.

As someone who's seen countless homeowners make costly pricing mistakes, I can tell you that getting this wrong doesn't just mean less money in your pocket – it can completely derail your plans for moving forward. Let's explore why this matters now more than ever.

I recently had a listing where my sellers (prior clients) rejected my price suggestion and insisted on listing much higher. I told them I'm presenting facts, but they didn't want to listen. To make a long story short, I suggested a $420,000 list price, and this was at a prime selling time in July. I only took the listing because of my prior experience with them. Otherwise, I would have thanked them for their time and moved on.

After many months without even one showing, and keeping them up-to-date with the current market on a weekly basis, they made a couple of reductions, which were still too high. When it came time for the listing to expire, I told them I couldn't sell their house at the price they wanted, and no other agent would be able to either. I was ready to walk away from the money I put into advertising the overpriced listing and the time spent on it.

They came back to me with a list price of $415,000 - $5,000 less than what I had originally suggested. And now we were in a slower market heading towards winter. We got a showing right away, and those people put in an offer. They also asked for seller concessions, so the offer was less than $415,000, but at this point, my sellers decided to accept it. This was a second home and they were finally ready to get it sold.

Today's Real Estate Reality Check

The real estate market has undergone dramatic shifts in recent years. After the pandemic-fueled buying frenzy where practically any home could sell regardless of price, we've entered a more balanced market that demands strategy.

Interest rates have climbed significantly from their historic lows, affecting buyer purchasing power. What buyers could afford just two years ago is very different from what they can afford today. Simultaneously, economic uncertainty has made buyers more cautious and selective.

Most tellingly, according to Realtor.com data, home delistings surged by 47% in May compared to the previous year. This isn't just a statistical anomaly – it represents thousands of frustrated sellers pulling their homes off the market after weeks or months of no showings, minimal interest, or lowball offers.

Even in areas where inventory remains tight, today's buyers come armed with more information than ever before. They've been watching the market, tracking price drops, and developing a keen sense of value. They know when a home is overpriced, and they'll simply wait for a price reduction or move on to the next property. And this isn't just for a changing market, this can happen in almost any market with the exception of the frenzied Seller's Market we recently had.

The Real Cost of Getting It Wrong

When your pricing strategy misses the mark, the consequences extend far beyond just a slower sale. Consider these ripple effects:

1. The Stale Listing Stigma: When a home sits on the market too long (often just 21+ days in many markets), buyers begin to wonder what's wrong with it. This stigma can be difficult to overcome, even with price reductions.

2. Fewer Qualified Buyers: Incorrect pricing can mean your home isn't showing up in the right search results. Most buyers search in price bands or increments, and if you're priced just above a common search threshold, you might miss a huge segment of potential buyers.

3. The Downward Spiral: Homes that start overpriced often end up selling for less than they would have if priced correctly from the beginning. After sitting on the market and facing multiple price reductions, sellers lose negotiating power and buyers sense desperation. I truly believe this is what happened with the listing I mentioned above. I think my sellers could have netted much more if they had priced their home correctly in the beginning, especially since it was a more active selling time.

4. Lost Opportunities: While your home sits unsold, you may miss out on your dream next home or face additional carrying costs like mortgage payments, utilities, and maintenance. Again, the listing mentioned above lost even more money with the holding costs for four+ months.

Now that we understand what's at stake, let's dive into the three pricing strategies that successful sellers use to avoid these pitfalls.

Strategy 1: Aspirational Pricing

What Is It?

Aspirational pricing means listing your home above what comparable sales suggest it's worth. It's based on the hope that the right buyer will come along who values your property's unique features enough to pay a premium.

Many sellers attempt to do this even if their home offers the same or less than others in the area. This usually requires price reductions, longer market time, and depending on when the home is listed, they might get lower offers than when they first listed it. I've seen this happen many times.

When It Works

This strategy isn't always a mistake – it can work effectively in specific circumstances:

Truly Unique Properties: If your home has features that can't be found elsewhere in the market (waterfront access, historic significance, exceptional views, or architectural importance), standard comps may not capture its true value.

Low-Pressure Selling Timeline: If you have the luxury of time and don't need to sell quickly, you can afford to wait for that perfect buyer.

Strong Seller's Market: In markets with extremely low inventory and high demand, buyers may be willing to stretch their budgets for the right property. This probably won't work for most areas in today's market at the time this article was posted.

Exceptional Marketing Support: If your agent has access to luxury marketing channels, international buyers, or specialized networks where higher-end buyers shop, aspirational pricing can sometimes succeed. But advertising rarely sells a home, especially if it isn't priced correctly.

The Risks

However, this strategy comes with significant downsides:

Missed Initial Exposure: Real estate listings get their highest traffic in the first two weeks. If your price deters potential buyers during this crucial window, you've lost your best opportunity to create competition.

Financing Issues: Even if you find a willing buyer, unless they're paying cash without an appraisal, their lender's appraisal might come in below your agreed price, potentially derailing the sale or requiring price renegotiation.

Buyer Psychology: Many buyers avoid homes they perceive as overpriced, assuming the seller is unreasonable and difficult to work with.

Expert Insight: According to a study by Zillow, homes that required a price cut sold for 2.6% less than comparable homes that were priced correctly from the start. I'm surprised that number is so low. I've seen it much higher than 2.6%.

Strategy 2: Comp-Based Pricing

What Is It?

Comp-based pricing relies on recent sales of similar properties in your area to establish a fair market value. It's the most common approach and the one most aligned with how appraisers value property.

The Science Behind It

Good comp-based pricing isn't as simple as averaging nearby sales. It involves:

Selecting Truly Comparable Properties: Homes similar in size, age, condition, layout, and location that have sold recently (ideally within the last 3-6 months).

Making Appropriate Adjustments: Adding or subtracting value based on differences between your home and the comps (better finishes, larger lot size, needed repairs, etc.).

Accounting for Market Trends: Adjusting for whether prices are rising, falling, or stable in your specific neighborhood.

Considering Supply and Demand: Looking at the months of inventory in your price point and how it affects competitiveness.

Variations on Comp-Based Pricing

Within this strategy, sellers typically have three options:

High Side of Comps: Pricing at the upper end of what comparable sales suggest, often 2-3% above the average. This works well when your home has superior features or upgrades compared to recent sales. This is usually a better way to sell than the above "Aspirational Pricing."

Middle of Comps: Setting your price right in the middle of the comparable sales range. This balanced approach attracts serious buyers while still maximizing your return.

Low Side of Comps: Pricing just below average recent sales to generate more interest and potentially create competition. This isn't giving your home away – it's strategic positioning. This is close to the strategy below - Event-like Pricing.

Real-World Application

Consider this example: Three similar homes in your neighborhood sold recently for $675,000, $685,000, and $695,000. Your home is most similar to the middle one but has a newer roof. A comp-based pricing strategy might place you at $689,000, acknowledging the improved condition while staying within the established value range. That's just an example, and I prefer listing at price increments that most buyers search in. So in this case I'd probably push it to $690,000. Some people won't be as interested in a new roof vs. a house that otherwise fits them better. So you can't always just add an amount of money towards what should be considered as basic home maintenance.

Some agents will suggest listing at a "unique" price as it will stand out more. I don't see that to be true. The home will still be within the buyer's price search and will be viewed along with all of the other homes that come up. Buyers will look at the price, but will be interested in the photos, square feet, lot size, etc. more than an odd price.

Strategy 3: Event-Like Pricing

What Is It?

Event-like pricing (sometimes called "value pricing" or "strategic underpricing") deliberately sets the asking price below comparable sales to create excitement and urgency among buyers. It's not about undervaluing your home – it's about creating a marketing event.

The Psychology at Work

This strategy leverages fundamental principles of consumer behavior:

Perceived Value: When buyers believe they're getting a good deal, they're more likely to act quickly and emotionally.

Fear of Missing Out (FOMO): Creating competition among multiple interested parties can drive up the final price as buyers worry about losing out.

Anchoring: By setting a lower initial price, you actually shift negotiations in your favor, as buyers mentally prepare to pay more than asking in a competitive situation.

When It's Most Effective

Event-like pricing works best under specific conditions:

High-Demand Seasons: Spring and fall markets when buyer activity is naturally higher.

Desirable Locations: Neighborhoods where homes rarely come available and buyers are waiting for opportunities.

First-Time Homebuyer Price Points: Price ranges where there are more buyers competing for limited inventory.

Strong Presentation: Homes that show exceptionally well, are properly staged, and have excellent photography.

The Implementation

To execute this strategy successfully:

1. Price 3-5% below recent comparable sales
2. Ensure your home is in excellent showing condition
3. Set an offer review date (often 5-7 days after listing)
4. Create robust marketing to drive maximum traffic
5. Have your agent communicate clear terms to interested buyers

A well-executed event-like pricing strategy can result in multiple offers and a final sale price above what comp-based pricing might have achieved. Some agents list most of their homes this way, convincing sellers that this can create multiple offers, pushing the price to where it should be, or higher. I like this idea, but I'm afraid of what to say to my sellers if this doesn't create that scenario. I don't have the guts to do this with our own properties when we sell.

Choosing Your Strategy: Questions to Ask Yourself

The right pricing strategy depends on your specific situation. Consider these questions:

What's your timeline? Need to sell quickly for a job relocation or to purchase your next home? Event-like pricing might be your best bet. Have the luxury of time? Comp-based or even aspirational pricing could work.

What's your risk tolerance? Event-like pricing carries the theoretical risk of selling below market value if competition doesn't materialize. Aspirational pricing risks a longer marketing period and potential stigma, with possible future price reductions necessary.

What's happening in your local market? Is inventory rising or falling? Are homes in your price range selling quickly or sitting on the market? These trends should influence your approach.

What's your competition? Look at other homes currently for sale in your area. How does yours compare in terms of condition, features, and price per square foot?

What are your post-sale plans? If you're buying in the same market, sometimes a faster sale at a slightly lower price makes sense if it positions you to make a good purchase on your next home.

Beyond the Price: Implementing Your Strategy

Whichever pricing approach you choose, remember that it's just one component of your overall selling plan. Here's how to maximize its effectiveness:

Pair With Proper Preparation: Even the best pricing strategy can't overcome poor presentation. Invest in necessary repairs, professional cleaning, and staging appropriate for your price point.

Marketing Matters: Your pricing strategy should align with your marketing approach. Higher prices require more sophisticated marketing; event-like pricing needs broad exposure to create the desired competition.

Set Expectations Realistically: Understand the likely scenarios for each pricing approach, including potential timelines, showing activity, and negotiation dynamics.

Have a Plan B: Before listing, know your pivot point. If you choose aspirational pricing, at what point will you consider a price adjustment? If you try event-like pricing but don't generate multiple offers, what's your next step?

Common Pricing Mistakes to Avoid

Even with the best intentions, sellers often fall into these pricing traps:

Pricing Based on Online Estimates: Automated valuation models can be off by 5-15% in either direction. They don't account for your home's specific condition or unique features.

Factoring in Your Renovation Costs: Just because you spent $50,000 on a kitchen remodel doesn't mean you'll get that amount back in your sale price. Improvements typically don't return dollar-for-dollar value.

I've had several Scottsdale home sellers who thought their upgrades would be the factor that sold their house. One older gentleman felt his old-fashioned "wood" paneling was worth an extra $5,000 (and this was many years ago). I didn't take that listing.

A woman thought her expensive, and expansive, drapery set-up, plus her brand new white carpet, would sell her Scottsdale townhouse. Well, I got the townhouse sold but found out that the buyer threw out the heavy and dramatic drapes and the new white carpet! I didn't tell my seller.

Ignoring Recent Market Shifts: Using sales from a year ago can lead to significant pricing errors in rapidly changing markets. Appraisers don't like going any farther back than 6 months; some prefer 3 months, especially in a changing market.

Emotional Pricing: Your memories and attachment to your home don't translate to market value. Buyers are making practical decisions based on comparison shopping. They are searching for a house in the location and price range that they desire, and one that makes them feel good.

Leaving No Room for Negotiation: Building too much "negotiation room" into your price can backfire by deterring potential buyers from even making an offer.

The Path Forward: Working With Professionals

The most successful home sales result from collaboration between informed sellers and experienced real estate professionals. When interviewing potential listing agents:

1. Ask about their pricing philosophy and how they determine value.
2. Request examples of recent listings and their pricing strategies.
3. Look for someone who presents data, not just opinions.
4. Find an agent willing to have honest conversations about value, even when it's not what you hoped to hear.

Remember that the best agents will sometimes turn down listings when sellers insist on unrealistic prices. That integrity is actually a positive sign.

Conclusion: Strategy, Not Just Price

Selling your home isn't just about picking a number – it's about choosing a strategic approach that aligns with your goals, local market conditions, and the unique qualities of your property.

The difference between a successful sale and a frustrating experience often comes down to this initial strategic decision. By understanding these three pricing approaches – aspirational, comp-based, and event-like – you're already ahead of most sellers.

Take the time to research your local market, consult with experienced professionals, and honestly assess your own situation. With the right pricing strategy in place, you'll be well-positioned to achieve the successful outcome you deserve when selling your most valuable asset.