What is the Principle of Substitution? In a nutshell it is the premise that people would prefer to spend less on a similar product. Sellers, your home is a product, make no mistake about it. The goal is to market it correctly for sale. That means making sure it has curb appeal. First impressions really do count. Secondly making sure the inside is clean, uncluttered and windows are Windex clean.
Thirdly, pricing your home correctly is essential. Here is where wisdom comes in. The Principal of Substitution means that an average buyer will weigh value based on structure similarities in similar areas. For example a 4 bedroom, 2 ½ bath Colonial with a two car garage and no basement listed in Howell for $475,000 versus a similar described home listed at $425,000 will more than likely be the victim of the Principal of Substitution. The lower priced home will attract more interest thus increasing the likelihood that it will sell quickly at or above list.
Sellers should consult with their Realtors and do their due diligence. Check the net. Research what similar houses are listed for and what they actually sold for. Be aware of changes in market conditions by reading real estate blogs and news articles. In some cases pricing the home a little below market value will draw more interest and result in a bidding war resulting in a higher than list sales price.
Pricing significantly higher than what a bank will appraise the home at is likely to result in financing troubles for buyers. Beware of buyers who come in at significantly higher price, they may be unscrupulously trying to lure you into a deal they know the bank will not finance because the offer will be so far above what the bank’s appraisal will be. Read my blog Wolf in Sheep’s clothing.