Chasing the market, or setting the market?

I watched an episode of Real Estate Intervention last night. Host Mike Aubrey discussed pricing in a market that’s declining. Mike brought up the concept of chasing the market versus setting the market. Sellers that are chasing the market are typically ones that want to start off asking the top of market price. While this strategy can work for a seller in a market in which prices are moving higher, it can harm a seller in a declining market. In many cases, the home remains unsold as competing homes are adjusting their prices lower to make them more attractive to potential buyers.

By the time the sellers are ready to adjust their home’s price to what their agent recommended before the home was originally listed, the market has moved even lower. Now, the sellers are chasing the market and are having to continue to reduce their price in an effort to catch up. They may well end up receiving much less money than they would have by pricing their home competitively to start with. As a real estate agent, I want my sellers to receive top-dollar for their homes. It is a balancing act between trying to come up with a price that will make a seller’s home look like a value when compared to the competition, while at the same time maximizing the seller’s return.

In today’s market, it’s becoming more obvious to me that sellers need to price competitively right from the beginning. It will save them a lot of hassle, and ultimately may put more money in their pockets.