Dubious Logic

According to a recent Wall Street Journal article, “some high-end sellers are taking a counterintuitive and risky step: raising the price.”

Does such a strategy ever make sense?

Before answering, let me trace the three-step logic implicit in such a move (at least most of the time):

One.  “Their home is like mine.”

Two.  “They just sold for more; therefore . . .

Three.  “My home is worth more, too.”

Flawed Logic

Spot the flawed logic?

It’s step #1 — the conclusion that the property that just sold for more money is similar to the one that hasn’t.

If that were really the case, and the Buyer had their choice of both properties — which they did, because both properties were on the market at the same time — the Buyer would have bought the cheaper property, not the one they actually bought.

Conclusion:  the unsold home isn’t underpriced, it’s overpriced.

Or at least it was, relative to the home that just sold.

What do you call an overpriced home whose owner just bumped their asking price?

Even more overpriced.  

P.S.:  In my experience, there’s really just one scenario where the owner of a listed home that hasn’t sold can raise their price:  if they make a substantial improvement, like remodeling a Kitchen, one or more Baths, etc.

Of course, if a home didn’t sell, was taken off the market, and re-listed after a lengthy interval, the new list price is truly that — a new list price (vs. a raised price).

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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