Pricing Your Home to Sell   

Coming up with the right price when selling your home is a balancing act. You want to ask for as much as possible, but not so much that you turn away potential buyers. You also don’t want to cheat yourself with a price that’s lower than your home’s worth.

The “right” price is one that’s in tune with what similar homes are selling for in your market. It’s a figure that you and the buyer agree accurately reflects the home’s value. If you’re working with a real estate Broker, the Broker can help you evaluate the market and resist the temptation to overprice your home — or give in to your fears and under price it.

You should listen to what your Broker says: You’re better off getting the price right the first time around. 

Determining Your Home's Market Value

A comprehensive market analysis (CMA) is essential to determine the value of residential property. Location and characteristics of the property are the key elements in determining value, therefore the basis for valuation is similar properties in your area. The market analysis takes into account the amount received from recent sales of comparable properties and the quantity and quality of comparable properties currently on the market.

The desired end result, of course, is to find a price that will attract a willing and able buyer in a reasonable time.

Once the value of your home has been determined, you can decide on an offering price that will achieve your goals. Generally, the price should not exceed the value by more than 5% or potential buyers may not even make offers.

How to price your home to sell

Your Broker will look at recent sales for comparable nearby homes to get an idea of your property’s market value. With access to a database of recent “comps” with this information, your Broker can give you an estimate of a reasonable price. He will also look at how long these homes were on the market, and whether sellers had to reduce their initial price in order to sell.

It’s also a good idea to look at online estimates from home websites such as Zillow and Redfin. The value these sites estimate for your home may not be an exact match to its true market price, but buyers are likely looking at these online estimates. If the estimates are off base, the sites will generally let you edit information about your home, which could lead to an adjustment.

When you want top dollar, it’s smart to have the right price the day your home goes on the market. When you offer your home at its true market value, you’re giving yourself the best chance to get a good offer in a reasonable amount of time.

Here are three reasons to price your home correctly from the start — and strategies for coming up with the ideal dollar amount, whether you’re doing this on your own or with a seller’s agent:

You can attract more buyers

Some sellers may be tempted to ask for more than market value — even if they’re willing to accept a lower offer — just to see if there are any takers at the larger number. But this strategy can backfire if sellers price their home out of range of potential buyers.

Say your home’s worth $299,000 according to your market research, and you’re willing to sell for that amount. But you list at $315,000 to see if anyone makes an offer at the higher price.

A serious buyer may have a budget of $299,000 and so search online listings only for homes priced through $300,000. That buyer may not even see your home unless you lower your asking price. It’s better to price your property right from the start to maximize the number of qualified buyers.

You will sell your home faster, for a higher price

In a hot market with many buyers, a fairly priced home could receive multiple offers because people recognize it’s a good deal. It may even spark a bidding war that drives the final offer above your asking price.

But an overpriced home could scare away some of those buyers, who may think that they’re dealing with an unreasonable seller. You may be willing to sell your house for less, but a buyer may not even bother to make an offer if the home’s overpriced from the start.

It’s even worse in a cooler market, one that has few buyers. The home will remain for sale with no takers until the price moves low enough to attract a buyer. And that means the seller is wasting time by offering a home at an artificially high price.

If a home doesn’t sell within 30 days, it’s a good indication that it’s not priced right, according to the National Association of Realtors. In addition, research suggests the longer a house stays on the market, the lower its final selling price will be. Sellers may end up making less money than if they’d priced the house correctly when it first listed.

Buyers will have more confidence in your property

You don’t want to price a home too high, but you don’t want to go too low, either. Then, a potential buyer may wonder if something is secretly wrong with your property.

If you offer your home for a fair price, one that’s similar to comparable sales in your neighborhood, a buyer may feel better about the transaction. The buyer may reason that if you’ve done your homework on pricing, you’ve also done your homework on making sure the home is in good condition.

How to price your home to sell

You can look at recent sales for comparable nearby homes to get an idea of your property’s market value. Your real estate agent has access to a database of recent “comps” with this information and can give you an estimate of a reasonable price. You’ll also want to know how long these homes were on the market, and whether sellers had to reduce their initial prices in order to sell.

It’s also a good idea to look at online estimates from home websites such as Zillow and Redfin. The value these sites estimate for your home may not be an exact match to its true market price, but buyers are likely looking at these online estimates. If the estimates are off base, the sites will generally let you edit information about your home, which could lead to an adjustment.

When you want top dollar, it’s smart to have the right price the day your home goes on the market. When you offer your home at its true market value, you’re giving yourself the best chance to get a good offer in a reasonable amount of time.

Pricing Your Home to Sell

Not only will you miss prospective buyers by overpricing your home, but you will affect how long your home will remain on the market and what the eventual selling price will be.

Activity vs. Timing

Timing is extremely important in the real estate market. A property attracts the most interest and excitement from the real estate community and potential buyers when it is first listed. Therefore, it has the highest chance of a sale when it is new on the market. Setting a realistic price from the beginning will help take advantage of this initial period and increase the chance of a timely sale.

An experienced agent who knows the market and the marketing process can help you determine the market value of your home, thereby giving you the best chance of quickly and smoothly selling your home.

Timing vs. Selling Price

When a home is overpriced at the start, it misses what can be the most critical time period in selling a home -the first weeks after it's listed. Once this period has passed and little traffic is generated at the initial price level, it becomes necessary to seek a lower listing price. Depending on market conditions this cycle may repeat several times before a sale is made, resulting in an eventual sale price that is well below the initial listing price, and possibly lower than the market value for your home.

Pricing Guidelines

Perhaps the most challenging aspect of selling a home is listing it at the correct price. It's one of several areas where the assistance of a skilled real estate agent can more than pay for itself.

Too High Can be as Bad as Too Low

If the listing price is too high, you'll miss out on a percentage of buyers looking in the price range where your home should be. This is the flaw in thinking that you'll always have the opportunity to accept a lower offer. Chances are the offers won't even come in, because the buyers who would be most interested in your home have been scared off by the price and aren't even taking the time to look. By the time the price is corrected, you've already lost exposure to a large group of potential buyers.

The listing price becomes even trickier to set when prices are quickly rising or falling. It's critical to be aware of where and how fast the market is moving - both when setting the price and when negotiating an offer. Again, an experienced, well-trained agent is always in touch with market trends - often even to a greater extent than appraisers, who typically focus on what a property is worth if sold as-is, right now.

Agent Education & Experience a Critical Factor When working with a real estate agent, it's critical that you have full confidence in that agent's experience and education. A skilled, knowledgeable agent should be able to explain to you exactly why your home needs to be priced at a certain level - compared to recent listings and sales of homes similar to yours.

Experienced agents also know exactly what the current pool of buyers are looking for in relation to particular styles and price ranges of properties. A skilled agent can recommend changes that will enhance the salability of your home, thus increasing the price - and/or decreasing the length of time before a sale.

It's critical to keep all these aspects of pricing in mind, and our experienced, well-educated RE/MAX Realty Affiliates agents can help guide you to make the right decisions.

For Professional Service Every Time...

 Michael Lange
Broker/Realtor^®

    

 

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