What’s the True Purpose of a List Price? Is it a marketing tool or a price tag?
I was playing Wordle with my 14-year old son a few weeks ago. It was one of those times where you have most of the letters but for some reason, your brain can’t find the word. He looked at me and said,
“We have to look at this differently, in a way we wouldn’t normally, that’s the only way we are going to figure this out.”
Then, like magic, the word appeared.
Most Realtors think about list prices that same way, no matter the market. Those agents are in for a rude awakening because the strategies we used a few years ago just don’t work.
Today’s unique market dynamics calls for looking at things differently:
Many sellers believe that a list price is a declaration of the value they expect to receive, but as Realtors, we know there’s a more strategic way to approach it. Instead of viewing the list price as an exact figure for negotiation, let’s reframe it as a tool for getting attention, sparking interest, and driving competition.
The Real Role of a List Price: Attracting Buyers
A list price is fundamentally a marketing tool—a first impression that entices buyers to take a closer look. In a low-demand market with loosening inventory, such as the one we’re experiencing now, this becomes even more important. By setting a list price that aligns with buyer expectations rather than seller ambition, you can help your clients attract more views, showings, and ultimately offers.
How Underpricing Can Actually Drive Higher Offers
The concept of pricing slightly below market value can be counterintuitive for many sellers. Yet, strategically setting a list price just under market value is a proven method to capture attention and create an emotional pull for buyers. This approach often leads to multiple offers, with competitive bids potentially exceeding the initial value. The Florida Association of Realtors has noted that homes priced below market value frequently receive multiple offers, increasing the final sales price through bidding wars.
The Drawbacks of Overpricing
Overpricing, by contrast, can cause listings to languish
on the market. With current mortgage rates around 7%, buyers are cautious about spending more than a property’s perceived value. Sellers may think setting a high list price leaves “room for negotiation,” but today’s buyers are savvier and less willing to engage with overpriced homes. Properties priced higher than comparable listings often struggle to generate interest, resulting in longer days on market and, in many cases, eventual price reductions that could have been avoided with a more attractive starting price.
The Psychology of Pricing in a Competitive Market
A competitive list price, especially in a market where supply is growing, taps into buyers’ desire for a good deal and the urgency to secure it. The NAR recently reported that properties priced right or slightly below market value not only generate interest but also foster competition. This buyer psychology is critical: when a home feels accessible, buyers are more inclined to submit competitive offers and potentially bid beyond what they initially intended.
Tips for Communicating This Strategy to Sellers
As realtors, helping sellers understand that the list price is a tool—not the final sale price—can be transformative. Here’s how to approach this conversation:
1. Emphasize Market Data: Show sellers data on recent sales, current mortgage rates, and trends in buyer behavior. Highlight that in competitive markets, well-priced homes draw more interest and stronger offers.
2. Set the Right Expectations: Position the list price as a starting point that encourages buyer engagement, not a final offer. Let sellers know that strategic pricing can often yield higher bids.
3. Explain Buyer Psychology: Help sellers understand the power of a “deal.” When buyers see a home priced attractively, it taps into their competitive instincts and increases the chances of multiple offers.
4. Stay Informed: Markets change, and the best strategy is to stay current. Encourage sellers to view the list price as a flexible marketing tool designed to maximize visibility and engagement with serious buyers.
Bottom Line
By shifting the mindset from “this is what I want” to “this is how I’ll attract buyers,” realtors can help sellers better navigate today’s market. Leveraging the list price as a marketing tool positions properties to capture attention, spark competition, and drive strong offers—transforming the pricing strategy into one of the most powerful tools at our disposal.
