Questions to consider
1. Is the local market rising, falling or staying even? Markets can change quickly for a variety of reasons. It is important for you to know what has sold in your neighborhood both recently and in the past for comparison and market trend analysis.
2. Is my opinion of value based on actual neighborhood sale prices? Don’t be fooled into thinking you can ask for a price just because another house is listed at a certain price. Comparative Market Analysis is based on what has “sold” in your neighborhood. Only 6% of homes sell for asking price.
3. How many homes in the area are competing against mine right now? Inventory is a key factor in what a house will ultimately sell for. The more inventory on the market, the less your home could sell for. Pay special attention to “new construction” in your area. This can cause a major reduction in value to your home.
4. How does my price compare? Study the homes on market in your area. Go to open houses if possible to see how your home compares in condition and value.
5. Have any neighborhood homes been on the market too long? If YES, Why? Study these homes if there are any in your neighborhood so that you can try to avoid the same pitfalls. Note: The #1 reason houses stay on the market too long is from being overpriced.
6. Is my home consistent with homes in the surrounding area? Buyers look for neighborhoods as well as homes. Is your home overbuilt for the neighborhood? I recently had a seller that wanted $300,000 for their home in a neighborhood where all other sales for the past 5 years in that neighborhood were in the $100k’s. Put yourself in the buyer’s shoes when it comes to your home. A buyer that has a budget of $300,000 is not going to buy something in a neighborhood with all other homes half the price of that home. Would you?
7. Should I and when should I do a price reduction? If you price your home correctly in the beginning, you should not have to do a price reduction, however the litmus test for a price reduction is when you are not getting showings and inquiries on the home. The main cause of buyers passing over your home is price. Be careful however because with a “for sale by owner” property it’s not always easy to know whether the lack of showings is because of price or if it is because of a bad marketing plan or the fact that many agents will not show FSBO properties. Try to research and determine what the true cause of minimal activity actually is.
8. Is my original purchase price or my financial needs influencing my asking price? Again pay attention to the market trends in your area. Depending on when you purchased your home, unfortunately it may have gone down in value. None of us can predict the future but if you have to sell remember buyers are planning to pay “market value.” Also be aware that no matter what price you agree to, chances are your buyer will have to get a mortgage on the house and it will have to appraise for that value or you may be back at the negotiating table and your buyer could walk.
9. Am I willing to price it right and stand firm? Sellers are often under the illusion that they have to price the home at a price higher than what they would accept for a contract. This all depends on your ability to negotiate. Keep in mind you may open more doors to potential buyers by pricing the home correctly and standing firm that your house is priced at “market value.” Remember buyers are typically searching in a price range. For example if you are willing to accept $249,000 for your home but you price it at $270,000, your potential buyer is probably searching online or with their buyer’s agent for homes in the 200-250k range and they may never see your home because it did not show up on their search.
10. Are the benefits of moving important enough to price my home at market value? We hear it all the time “I don’t have to sell” and that’s fine but why are you selling? What is your motivation. If you have plans for where you want to be or a financial goal you want to achieve then weigh the options of the cost of selling it quicker by pricing at “market value” vs. holding out for a higher price. For example if you have a $2000 mortgage payment every month and it takes you 6 months longer sell or figure out you either need to price the home at market value or decide you need to hire an agent to get the home sold…you just lost $12,000 in 6 months. Calculate the cost of time-on-market. You can capture more money by selling yourself, but it will likely take longer. Add up the monthly cost of continuing to own your house. That will include the mortgage, property taxes, utilities, fees and seasonal maintenance costs. That is how much equity you lose each month by sticking with a too-high price. Chances are it won’t take long to run down your equity. Price your house to sell swiftly and you won’t erode your equity.
BENEFITS OF PROPER PRICING
FASTER SALE: The proper price gets a faster sale, which means you save on mortgage payments, real estate taxes, insurance, and other carrying costs.
LESS INCONVENIENCE: As you may know, it takes a lot of time and energy to prepare your home for showings, keep the property clean, make arrangements for children and pets, and generally alter your lifestyle. Proper pricing shortens market time.
INCREASED SALESPERSON RESPONSE: When salespeople are excited about a property and its price, they make special efforts to contact all their potential buyers and show the property whenever possible.
EXPOSURE TO MORE PROSPECTS: Pricing at market value will open your home up to more people who can afford it.
BETTER RESPONSE FROM ADVERTISING: Buyer inquiry calls are more readily converted into showing appointments when the price is not a deterrent.
HIGHER OFFERS: When a property is priced right, buyers are much less likely to make a low offer, for fear of losing out on a great value.
MORE MONEY: When a property is priced right, the excitement of the market produces a higher sales price in less time. You NET more due to the higher sales price and lower carrying costs.