Setting an Asking Price for Your Home
A few basic things to consider when deciding on an asking price for your property.
- You never want to price your home too high and scare buyers away or drive them to buy another home that is your competition.
- You never want to price your property too low because you may be leaving money on the table.
- You want to try and find that "sweet spot" for an asking price so it attracts the most prospective buyers.
So, setting the appropriate asking price for your home is both an art and a science. Obtaining the optimal sales price is the result of objective research into comparable properties that have sold (these are the facts of the market), taking into consideration properties that are under contract, knowing what homes are currently for sale (these will be your direct competition) and factoring in the current market conditions.
The right price should:
- Attract as many buyers as possible
- Allow you to earn the most money the market will bear
- Help you sell as quickly as possible
Simply, price is the #1 factor that most homebuyers use when deciding what properties they want to see. It's important to remember that, although the asking price is set by you, a property is only worth what the buying public is willing to pay. So, it's best to not make the common mistake of overpricing because that can cost you time and money in the end.
The Importance of Proper Pricing
- Faster sale and less inconvenience
- Exposure to more buyers
- Increases Realtors® response
- Generates more advertising/sign calls
- Attracts higher offers
- Means more money to seller
What really matters is how your home compares to the others currently offered for sale and recently sold in your neighborhood or area.
Common Reasons for Overpricing
- Over-improvement of the home
- "Need" to get a certian amount from the sale
- Moving to a higher-priced area
- Original purchase price too high
- Lack of factual market data
- Trying to build in too much bargaining room
- Don't have to sell
- Emotional attachment
- Opinion of friends and family
Dangers of Overpricing
- Typically, the most of the activity on your home will occur in the first few weeks. Pricing a home properly can creating urgency in the minds of agents and potential buyers.
- Buyers who have seen most available homes in their price range are waiting for the "right house" to come on the market. That's why if a house is priced right, it can sell quickly because buyers may be waiting for it.
- If you start with too high of an asking price with the assumption that you can reduce it later - you may have missed out on the perfect buyer for your home.
- A major cause for concern is appraisal problems; overpricing can lead to loan rejections and lost time on the market.
- Even if your home is nicer than other homes in the same area, your house won't be picked for viewing if you set the price too high. Buyers are not only looking at your home, they are looking at all the homes for sale.
- Buyers and agents become aware of the long exposure period for some home and can be hesitant to make an offer because they fear something is wrong with the property.
- Fewer potentially qualified buyers will show interest in your home.
- You can help sell similar homes that are priced lower than yours.
- You could lose money as a result of making extra mortgage payments while incurring taxes, insurance and unplanned maintenance costs.
The Role of a Real Estate Agent in Pricing
- Provide you with a comparative market analysis (CMA), a comparison of the prices of recently sold homes that are similar in terms of location, style, and amenities. A CMA is performed by comparing previously sold homes in the area, and currently active homes to know your competition.
- There is no "exact price" for real estate - no agent can perdict with 100% certanity what a property will actually sell for.
- We don't tell you what we think your home is "worth". The market determines value…together we determine the price.
- You determine the price based on the factors you control:
- Marketing time
- Financing alternatives provided
- Property Condition
- Keep in touch with market trends and keep up to date with market activity of comparable homes.
- Estimate your net proceeds.
- Help to determine if offering incentives will help get the home sold.
An agent has NO control over the real esate market conditions. Never select an agent based on price. Select and agent based off the strength of their marketing plan, experience, market knowledge, communication skills and their track record of successful home sales.