House Sale Price: List It Right from the Beginning

House-Price-See-Saw

The Research

Are there any negative effects from changing the listing price of a property? The question that haunts Brokers/Agents as well as sellers of property was investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.

In Knight, the impact of changing a property’s listing price is investigated. Additionally, the types of property that are most likely to experience a price change are also estimated. The findings from this research indicate that, on average:

  • Properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.
  • Bigger price changes are found to experience even longer marketing times and greater price discounts.
  • The greater the initial markup, the higher the likelihood that any given property will experience a listing price change.

Implications for Practice

Sellers should therefore be aware of the critical necessity of getting the price correct from the start. Sellers wanting to over price will ultimately take longer to sell and will sell their property for less, on average, according to Knight. Brokers/Agents’ desire to take a listing and get the price right later are not doing their sellers any favors. Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.

Interestingly, the direction (up or down) of the listing price change does not matter. A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices. Therefore, get the price right from the beginning. It is best for all.

Endnotes


[1] Knight, John, R. (2002). Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes. Real Estate Economics. 30:2, 213-237.

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