Pricing Strategy: List High, Price Low, or Price Right?

When you sit down with a real estate agent to list your home, the conversation eventually lands on one number: The List Price.

This isn't just a label you slap on a Zillow listing. It is a strategic signal. The price tells the market how serious you are, how motivated you are, and how much competition you expect.

Sellers usually fall into one of three camps:

1. The "Shoot for the Moon" Camp: Price high and see what happens.
2. The "Bait" Camp: Price low to incite a frenzy.
3. The "Goldilocks" Camp: Price exactly at market value.

Which strategy actually puts the most money in your pocket? Let’s break down the psychology and the math of each approach.

Strategy 1: Pricing High ("Leaving Room to Negotiate")

The Logic: "My house is worth $900,000. Let's list it at $950,000. That way, if a buyer offers $900,000, I can accept it and feel like I won. I don't want to leave money on the table."

The Reality: This is the most common mistake sellers make. In real estate, overpricing is the kiss of death.

• The "Stale" Effect: The most activity on a listing happens in the first 14 days. If you are overpriced, serious buyers will scroll right past you. They won't even schedule a tour because they think you are unreasonable.
• The Stigma: After 30 days with no offers, you are forced to drop the price. Now, buyers smell blood. They think, "What's wrong with it? Why hasn't it sold?"
• The Result: You usually end up selling for less than market value because you lost the momentum of being a "fresh" listing. You end up chasing the market down.

Verdict: ❌ High Risk, Low Reward.

Strategy 2: Pricing Low ("The Auction Effect")

The Logic: "My house is worth $900,000. Let's list it at $799,000. We will get 50 people at the open house and 10 offers, and the bidding war will drive the price up to $950,000."

The Reality: This is a powerful strategy, but it requires nerves of steel. It works best in a "Seller's Market" with low inventory.

• The Frenzy: A low price acts like a magnet. It brings in buyers who can barely afford the neighborhood, but it also brings in the serious players who recognize a deal.
• Social Proof: When a buyer arrives at an open house and sees a line out the door, their competitive instinct kicks in. They stop asking "Is this house worth it?" and start asking "How do I win?"
• The Risk: If the market is cooling, you might not get the bidding war you hoped for. You risk receiving offers at your low list price and having to awkwardly reject them (which is legal, but frustrating for everyone).

Verdict: ✅ High Reward (in a Hot Market).

Strategy 3: Pricing Right ("Fair Market Value")

The Logic: "The comps say the house is worth $900,000. Let's list it at $899,000. It’s a fair price for a fair house."

The Reality: This is the safest, most consistent strategy. It respects the data.

• The Audience: You attract the right buyers—people who can afford the home and are looking specifically in this price bracket.
• The Appraisal: By pricing near the actual value, you reduce the risk of the appraisal coming in low later in the transaction (a common problem with the "Bidding War" strategy).
• The Outcome: You will likely get an offer close to the list price within a reasonable timeframe. It’s a smooth, low-drama transaction.

Verdict: ⚖️ Safe, Reliable, Professional.

The Winner?

In a competitive market like Los Angeles, Strategy #2 (Pricing Low) is statistically the most effective way to maximize the final sale price.

Why? Because competition drives value.

A buyer will rarely pay $950,000 for a house listed at $950,000. They will try to negotiate you down. But that same buyer will pay $950,000 for a house listed at $899,000 if they know there are three other people trying to buy it.

The Takeaway: Don't be afraid of a lower list price. It isn't the final price; it's the starting gun. If you want to break a record in your neighborhood, you don't do it by asking for a record price—you do it by creating a record amount of demand.