Many sellers want to ask for the highest price possible. But is that in your best interest? Below I'll go over a couple scenarios that could ultimately net you a higher price.
Start Higher, Lower Later
Let's say that my analysis shows that your house should sell with a net sales price of about $300,000. If you list the house at $350,000 what will happen? Many buyers will see your house online and see that something doesn't add up. Maybe the square footage is much smaller than other $350,000 houses. Or maybe the features don't match other $350,000 houses. Or the location may be significantly different than other $350,000 houses. Many buyer will rule out your home because it won't compare as well as the other homes at $350,000. The net result is that you will have fewer showings. You will still have some showings, but the feedback from them will usually be "overpriced."
A few weeks go by and you decide to lower the price of your home to $325,000. You'll start to get more showings as there will be some buyers with a maximum price range of $325,000. But these buyers will still compare them to other houses at $325,000 and those houses will usually have more features, or more square footage or some other combination of positive attributes. They will still pass on your home. You begin to wonder why your home isn't selling. Is the agent doing something wrong?
A few more weeks go by and you decide to lower the price to $310,000 because you want to sell above $300,000. Now more showings are happening but no one is writing an offer. Buyer are perceiving this as a "what's wrong with that house" because it's been on the market for quite a while now. We let the other agents that have shown the house know that we reduced the price. Some of them let us know that their buyer already bought something else.
Still a few more weeks go by and you are now lowering the price to $295,000. Buyers are now perceiving the "let's make a deal house" because it's been on the market for 2 or 3 months. They are saying there should be price flexibility in this house. One of these buyers may make an offer. It's $275,000 with you paying 3% of their closing costs.
In this above scenario, you'll end up with a net offer amount around $275,000-3%=$266,750. This may be negotiated up some but it's still less than the $300,000 net sales price that I suggested earlier.
Price it at Market Value
So now let's take a look at pricing the home at $300,000 and what that does to the buyer. Many buyers search in ranges such as $275,000 to $300,000, while other buyers may be looking at $300,000 to $325,000. By pricing it at exactly $300,000, this exposes the home to both ranges of buyers. If we price it at $299,900, that $100 savings stops all those at $300k-$325k from seeing the house. So by pricing it at $300,000 we get a lot of showings. Maybe 5 the first day, and 5 the second day. With that number of showings, the house should sell in a matter of a few days. Currently (2015), the market is red hot with many sellers receiving multiple offers. That could happen and push the price higher. But even if it doesn't, someone comes in and offers full price, $300,000 minus 3% of closing costs. We counter at $305,000 with 3% and get the deal done at a net sales price of $295,850.
Why did this happen?
When buyers see the right price in balance with features and amenities, they buy, especially when the house is fresh on the market. Once the house has become market worn, they often offer lower than the current list price. This is because if it is not selling to anyone else, there is no pressure to buy. They can make an offer and it has to be taken seriously by the seller.
In the second example, since the house is fresh on the market, they know they have to act accordingly. That almost always means a higher offer price which in turn yields a higher net sales price. This in turn means you can get on with your life sooner rather than later.