The three main components that go into pricing a home are: Location, Condition and Price.
You obviously can't change the location of your home (unless it's a mobile home) but you do have control over the condition and the price. You can improve the condition of your home as much as you want, but need to consider the amount of time and money you are willing to invest. Not all improvements you make are guaranteed to increase the sales price of your property. It's important to analyze the surrounding market and comparable properties before choosing to do any major renovations.
The price you list your home for is completely up to you. You could list it at $40,000,000 if you wanted (although you probably wouldn't get a lot of offers) but it's usually best to defer to your agent. They know the market, surrounding neighborhood, and what properties have sold recently and how they compare to yours. They factor all of this information into the highest possible list price the market will accommodate.
The price you choose will determine how long your home will stay on the market and how many offers you will get.
How to Price your Property
To evaluate your home’s market value, your Locations agent will analyze recent comparable sales activity. This is called the comparative market analysis or CMA. They will evaluate three factors: comparing your home to others that have recently sold, others currently listed and adjustments needed for extraordinary improvements.
Although home improvements can increase the value of your property, it’s more likely these upgrades will simply help the home to sell faster than competing homes without similar renovations. Sellers sometimes feel that if they spent a certain amount on a home improvement, they should be able to recoup that cost by tacking it on to the sales price. Unfortunately, that’s not always the case. Upgrades are important, but buyers may not share the owners’ enthusiasm, nor agree with the owners’ perceived value of the improvements. And if a buyer doesn’t see the value, then it has no value.
A professional analysis of the market will take all of this into consideration as well as analyze the price other homes have actually sold for, not just the asking price (there may be a sizable difference). The most common mistake sellers make when pricing their property is only considering the asking prices of other properties. Remember, a list price does not suggest market value of a home. It is simply the “asking price” or “ideal price” of another seller.
It is also important to remember that today’s Internet-savvy buyers have access to all the real estate information out there including other listings and past sales. Buyers are very smart, cautious, and not willing to pay more than the actual market value for a property.
IMPORTANT NOTE: Consequently, it is not advisable to pick a real estate agent based on who offers the highest list price or the lowest commission. While these are both common tactics to get your listing, they are not a good way to get your listing sold. The reality is, many real estate agents are out who will purposely list a home they know wont sell. They do this because they want to work Open Houses, to meet new clients (usually buyers) who they will help purchase other homes.
In the end, it will be you, the seller, who selects your listing price, and if it’s significantly different than what the past sales data reflects, discuss it with your Locations agent. Many sellers purposely price their home slightly under estimated sales price, so that it creates a frenzy of buyers & agents interested in the home. This often creates multiple offers, which can push the sales price up much higher than the list price.
Locations agents are trained and experienced on how to price your home to attract the most buyers. Contact us today
Dangers of Overpricing
Your home will have the most interest during its first 14 days it’s on the market, when the real estate agent and the buyer interest is at its peak. However, if a property is priced too high during this crucial period, it won’t attract the right buyers, and once that momentum is lost, it’s almost impossible to recover. The end result is your competitors (other comparable homes for sale) will end up being purchased while yours sits on the market.
Setting a realistic, market-based listing price, on the other hand, ensures that your home appeals to the largest number of qualified buyers. This increased interest leads to a better chance of multiple offers, which may lead to a bidding war and your home being sold above your list price. Overpricing is NOT a tactic that will encourage buyers to negotiate down to your “real” price. The goal with pricing your home is maximizing buyer interest and competition to increase the chances of your home being "bid up" and sold above its list price.
Buyers are smart. They have canvassed the open houses, they’ve seen what is available, and they know what homes like yours are selling for. If your home is overpriced they will move on without an offer because your home doesn't compare to the other homes they’ve seen in that price range.
Remember, every home is different and requires a different strategy. Consult with your agent who will help you consider all factors before deciding on a price.