Although there is a great deal of information on the Internet that can help you decide how to set the price on your house, it takes a real estate professional to evaluate the data to your best advantage. A deep knowledge of your surrounding area and current market conditions is a big part of an agent’s expertise, and their sales experience working with many different clients gives them valuable insight into the psychology of buyers. Finding the right price for your home is vital if you expect a quick sale. If potential buyers think your property is overpriced, they may move on, leaving your home on the market too long. A house that sits without an offer in the first two or three weeks will lead buyers to speculate why it hasn’t sold and assume there are problems. Studies show that homes priced 10% above market value are far less likely to sell within the first 30 days than those priced within 5% of market value.
Remember that the asking price must accomplish three purposes:
It must be as high as possible so that it allows you, the owner, and the maximum financial return upon the sale of your property.
It must compete with other similar homes so that we can obtain showings to qualified buyers.
It must allow for some negotiation with an interested buyer. Most buyers are more committed to the purchase when they feel that they made a good purchasing decision.
Of course, if you price the home too low, you will probably be leaving money on the table. In either case, a real estate agent can help you find the sweet spot to price your property correctly the first time and make your sale as quickly and painlessly as possible. Here are the things to consider:
Sales History of the Area Your agent will pull comparable listings and sales from your immediate neighborhood for the past three months. The radius of the search will be about ¼ to ½ mile from your home. Pay attention to dividing lines such as highways or other major dividing streets. Comps from “the other side of the track” will not apply to your home. The comps will only be effective when comparing apples to apples, including age of the property, square footage, and desirability (dream homes might be able to tack on a premium). Other considerations include lot size and configuration, amenities and upgrades. Your agent can also compare final sales prices against original list prices.
Check Out Your Competition Your agent can find out the details on pending sales in your neighborhood and how long these homes have been on the market and take a careful look at the active listings as well. Your agent will compile a CMA Comparable Market Analysis. The (CMA) includes a fact-based portrait of the home including information such as number of bedrooms and baths, approximate square footage, size of major rooms, age of the home, property taxes, and desirable amenities such as fireplaces and pools. Remember that sellers can ask whatever they like, so the prices you see might not reflect the final sales amount. Tour the homes if possible to experience what buyers will find when they visit. Your agent will help you evaluate what makes your home preferable to these and adjust your asking price accordingly.
Market Trends and Micro Trends Your agent will consider national, regional and local market trends when setting the price for your home. National factors could include possible rising interest rates. Locally, consider whether sales prices in your neighborhood have been rising or falling. Micro trends are changes that could directly affect your neighborhood. For example, is a new shopping center or park being built nearby? These sorts of things can increase the value of your home.
Be Aware of Your Immediate Neighbors Even the most luxurious house can be adversely affected if the people living across the street never mow the lawn or have a fence that is falling down. On the other hand, if they have a lovely garden and pristine curb appeal, that could help you as you determine the asking price for your home.
Talk to your agent Your agent will be invaluable to you as you evaluate all of these details. Working with a reputable, experienced agent will make all the difference as you negotiate the entire sales process. Lean on your agent to guide you successfully to set just the right price and meet your goal for the sale of your home. It is tempting to determine the asking price of your home by figuring what you originally paid for it, adding the cost of improvements plus a healthy profit, and then putting it on the market. This is a rookie mistake and can cost you a lot of time and money. It is essential that you place a smart, competitive price on your property. If the price is too high, your home stays on the market longer, increasing your expenses along the way. You may think it’s a good strategy to start high and then reduce the price if necessary. But, if potential buyers see a history of a dropped asking price, they will either wonder what’s wrong with the home since it hasn’t sold or they will think you must be getting desperate and will offer an even lower price.
Your real estate agent can tell you that sellers who list competitively from the start will get a better price than those who list high and then go lower and lower. Let your agent help you avoid the overpricing trap. Together you can review a comparative market analysis of similar homes to yours that have sold in your area recently. Also, consider your local market conditions. Are homes in your neighborhood selling quickly? Is it currently a buyer’s market or a seller’s market? Are you putting the home on the market during the spring home buying season or in the middle of winter?
Remember that some buyers are motivated by more than just price, so plan to be flexible to get your home sold quickly. When do the buyers want to move into the house? Can you, the seller, finance the home? Are you willing to leave the patio furniture or an area rug? Be open and creative as you review the buyer’s offer.
Note: If a REALTOR® is willing to list your home without seeing it. This is a sure sign of a bad agent, that has no knowledge of what it takes to sell a home. I would just move on to the next agent or this could be a costly mistake.
The Highest Price May Not Be the Best Much of the country is currently experiencing a strong sellers’ market. Homes are moving quickly and it’s quite likely a property may receive multiple offers. This is a strong position for you if you have your home on the market, but you need to be wise when judging which offer is actually the best one. It is natural to want to take the highest price, but be smart and look at the whole offer to judge if it is really the best option. You want an offer that has a good chance of closing successfully and is not weighed down by unreasonable or undesirable contingencies.
Example: One offer is $5,000 above the next, but includes a contingency for inspections and mortgage appraisal. The buyer making the second offer has conducted a pre-inspection and is willing to take the home as-is and waive the appraisal. You may decide the $5,000 difference is not worth the potential problems and take the second offer. Example: one offer is considerably higher, but is only putting down 5%. A lower offer that includes 20% down may be the better choice for you. A low down payment can mean the buyers are not really serious about your house and will pull out of the deal if they find something they like better. Example: you receive one offer with conventional financing and another a few thousand dollars higher with FHA financing. This may be significant to your decision, especially if you are in a hurry to close the deal because of a job transfer or other reasons. FHA loans have more stringent guidelines than traditional loans and therefore more risk for slower closing dates. It might be better to take the lower offer to dodge potential complications.
You want to avoid accepting any offer with risks that it could backfire. If your buyers get cold feet after your house has been off the market for several days, you are back to square one. The next buyers in line will assume something is wrong and momentum for selling your home could be stalled.
The following sliding scale is a good illustration of the worst to the best scenarios you could expect if multiple buyers offer the SAME price for your home:
All cash, no contingencies
All cash, pre-inspected
Big down payment, inspection & appraisal waived
Big down payment but contingent on inspection and other contingencies
Contingent on low down payment, inspection, appraisal, title & HOA review, low earnest money and asking for closing costs
As always, count on your agent to help you evaluate the strength of each offer you receive. Enjoy being in the driver’s seat while selling your home in this competitive market. The tables may turn as you begin the search for your next house!
The dangers of overpricing your home when putting it on the market
I came across a well thought out list of the dangers of overpricing your home for sale. I thought that I would pass it on to you.
1. Many potential buyers won't even look, thinking it's out of their range. 2. Those buyers who do look are shopping by comparison, and looking at your home may convince them to make a bid on a different property. 3. Since an appraisal is often required in financing a property, it's futile to price a property for more than it's worth. 4. Properties left on the market for extended periods of time usually become "shopworn," causing many buyers to believe something's amiss. 5. Overpricing tends to dampen the other salesperson's attitude, making it less likely to be shown. 6. Overpricing lengthens marketing time, and invariably results in a lower selling price than would have been otherwise obtained.
Let Valerie Bomberger, ABR, AHWD Re/Max Harbor Country help you in the Home Selling Process.