Pricing Your Home for Sale
Setting the asking price is a tricky part of listing your home. Too high and you won't even get an offer. Too low and you'll give away your equity. So how to do it right?
Rule #1 is to ignore gossip and to disregard the asking prices of homes that have sold. Some sellers don't want to admit that they took less than their asking price… especially if the discount was substantial. And we all know how stories can grow. So unless you've seen the actual selling price as reported to MLS or the county, pay no attention.
Begin your research by looking at the other homes for sale in your neighborhood. You may have been inside of some of them and have a good idea of how their condition and amenities compare to your house. If one is priced noticeably higher or lower than similar homes, disregard it. There's either a defect you don't know about, a feature you haven't seen, or the seller has been misguided.
Knowing the asking prices on other homes for sale shows you your competition. If you're in a hurry to sell you may want to list a bit lower than the others. If you're in no hurry and truly feel your home is in better condition and/or has more to offer, you can go a bit higher.
Knowing the other prices also gives you insight to use when your prospective Realtors present their market analysis findings. Sad to say, some agents try to "buy" listings by giving the sellers false expectations. They promise to sell the house for more even though they know that the market determines the price, not the agent. It is nothing but a ploy to get your listing, so if you have 3 agents presenting their market analyses and one is significantly higher or lower, take it as a warning that the agent might be less than honest.
However… don't go by bottom line price just yet. Before you pass judgment, read each report. The "odd" one may turn out to be the correct analyses.
A market analyses will first compare your home to 3 or 4 others that have sold recently. The agent will have made adjustments based on square footage, lot size, and the various features of the house. This is not an exact science, so different agents might use different adjustment figures. They should, however, be reasonably close.
After comparing your house to some that have sold, the analysis will compare your home to other homes for sale in your vicinity. Pay attention to these numbers because these are your competition.
The final section makes a comparison to homes that expired off the market without being sold. This one is very important to you because it shows you "how much is too much."
Your job is to read and study those value adjustments and see if they make sense to you. And, if you've been in the homes used for comparison, decide if the homes used really are comparable to yours. If you haven't been in those homes, you can tell a little by the photographs and the addresses.
If you don't understand the adjustments or the recommended price, do ask the agent to explain. It's very difficult to write down everything about a house on a form with small fill-in blanks and most forms don't offer enough comparison points.
The agent should have chosen homes as similar to yours as possible in:
- Location
- Age
- Size
- Lot size
- Amenities
Finding comparable homes is relatively easy if you're in a large subdivision. If you happen to live in a rural area where no two homes are alike, it becomes much more difficult. This is especially true for the "sold" section if you're in a slow market - because the houses chosen should have sold at least within the past 6 months. The more recent, the better.
Your starting price is important. Please don't fall into the misconception that you can "price it high and come down later if you have to." If you do, here's what can happen:
- Your home is used as a comparison to show buyers what a "good deal" some other house is.
- People who might buy it won't even see it, because it won't fall into their search parameters.
- Agents won't show it a second time because they know it's overpriced and they don't want to waste their time or their customers' time.
- The house will become "stale on the market" and both agents and buyers will assume there's something wrong with it.
So, price it on the high side of reasonable if you must. But if your agent and your observations tell you the house is worth $200,000 - don't price it at $250,000. You'll be doing both you and your agent a great disservice.
Choose an agent you trust, and follow his or her recommendations.
Click here to contact me if you have any questions.
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