Applying the “Eat Well, Sleep Well” Adage to Real Estate

In the investment world, the adage “eat well, sleep well” refers to the trade off made between risk and return. The more risk one is able to stomach, the higher the potential return and thus the possibility of eating well. However, with risk there often exists great uncertainty and volatility, thus the possibility of sleepless nights. Conversely, one can invest conservatively which means sleeping well, but the return will probably be lower which translates into not eating as well.

There are investors in real estate. But that is not the subject of this discussion. What I would like to address is the investment component of the owner occupied property. What is the tradeoff between risk and return in terms of pricing as it relates to putting one’s own home on the market. It seems everyone desires selling at the top dollar possible. In the pursuit of that objective there exists the risk of pricing too high. And yet to price one’s own home too low seems counter intuitive to people because pride of ownership is human nature, so how could one logically and emotionally under price one’s own home?

The greatest risk in pricing too high is that the market will not respond, buyers will not come to see the home, agents will not want to show the home. Then the property becomes “shop worn” and people start to wonder if there is something wrong with it. When the price does come down, the best buyers have probably already purchased, so what is often left are the second tier buyers. Or one has to wait for market conditions to change or new buyers to enter the market, all of which takes time. And time is money.

The greatest risk in pricing too low is the possibility of leaving money on the table. However, it is my experience that the forces of supply and demand are so strong, that if a property is underpriced, the market will respond. That is when there are bidding wars and multiple offers. That is the fundamental function of an auction. In an auction, the price starts low and is bid up by market forces. Typically real estate however the starting list price is high and the buyer negotiates the value down to get it to a market price.

So how is a home owner to assess the risk and return trade off? A good Realtor with strong market knowledge can assist a home owner with these questions. Karen Briscoe with the Huckaby Briscoe Group, Keller Williams Realty would like to be that Realtor for you.

Whether it be selling or buying of real property, Karen can be reached at 703-734-0192 or Homes@HBGroup.us. Or visit the HBGroup website for more information at http://www.HuckabyBriscoe.com.