Guide to PRICING YOUR HOMEList your Home for Sale
Most home sellers approach pricing with one major question in mind: What’s my home worth? The answer to that question determines that all-important asking price. Of course, everyone wants to walk away with the highest possible purchase price – and the highest possible profit -- so it’s tempting to simply start with the price you paid for your home, add a mark-up and call it good.
While that approach may work in a hot seller’s market, in today’s less-certain economy, setting at the right price requires strategy. Your asking price has a great deal of impact; if your home isn’t priced right, potential buyers may not even notice it because it doesn’t fall within their price range.
And though you may have set a higher price because you were just trying to leave yourself some wiggle room at the bargaining table, prospective buyers aren’t psychic. They don’t know that you’re willing to negotiate -- all they’ll see is that too-high price.
It takes a bit of research to find that sweet spot, otherwise known as a price that reflects your home’s true market value and that will help your home sell quickly. These strategies will help you determine an asking price that’s just right.
Market TrendsBegin the home-pricing process by determining the historical and current market trends in your neighborhood and region. Use online sites such as Zillow and local property records, which are available to the public, to research past sales, pending sales and homes currently for sale in your local market. Look at sales from one year, six months and three months ago. Note the differences between the asking prices and the purchasing prices.
Notice the time of year with the most sales, too. Home sales can be seasonal; spring tends to be the busiest time, as families attempt to move before the start of the next school year. Summer and fall tend to have more sales, while winter tends to be the slowest season due to the holidays and, in many areas, the cold weather.
By comparing similar property sales and listings in your area, you’ll get an idea how the market is doing. How long are homes sitting on the market? Are sales prices trending down or up? Are home selling for less than asking price? If so, what’s the percentage? The relationship between listing price and purchase price can help you determine your own asking price. For instance, if most properties are selling for an average of 5 percent less than asking price, you’ll have a better idea what types of offers and purchase price you’re likely to get.
Economics 101Beyond your neighborhood, larger factors influence the local market. Are interest rates low, or are they projected to climb? Low interest rates lead to a hotter market. Similarly, how’s the job market in your area? Check the unemployment rate trends. Lower unemployment leads to more job security and an upward-trending market. In contrast, if workers are afraid of getting laid off, the market will likely slow.
Finally, consider inventory in your local market. Are there many or just a few homes for sale in your neighborhood? When supply is high, prices tend to drop; that's known as a buyer’s market. When supply is low, demand – and prices -- will rise, leading to a seller’s market. All of these factors may affect your asking price.
Out in the FieldResearch isn’t all about paperwork and Internet searching. Do a bit of legwork, too. Visit open houses in your neighborhood and talk to sellers, agents and potential buyers. Compare the features, amenities and condition of similar properties to your own home. Then draw some frank comparisons: Would you rather buy your home or this home? Don’t be afraid to ask questions of the other sellers, their agents and even buyers to get a clear picture of local market conditions.
AppraisalIf you can’t obtain adequate comparable data about other home sales in your area, consider obtaining an appraisal from a licensed professional to provide an objective value for your home.
Setting a PriceNow that you’ve done your research, it’s time to find that magic price. Using the data you’ve collected, determine an average sold price for the comparable homes in your area. Your asking price should generally be within 10 percent -- higher or lower -- of this average purchase price.
Add a bit more for your home’s upgrades and unique features. Subtract a bit if your house is in worn condition or needs upgrades or repairs.
Calculate your home’s cost per square foot by dividing your asking price by your home’s square footage. Your price should be comparable – within 10 percent above or below -- to the other sold, pending and currently listed homes in your neighborhood.
Next, tweak the price a bit with what’s known as “price banding.” Home prices tend to fall in bunches. Take a look at the other asking prices in your neighborhood. Find a range where there aren’t a lot of other prices and fill that niche. For instance, if several houses fall within the $225,000 to $250,000 range, then the next bunch of houses fall within the $275,000 to $300,000 range, a home priced in the $260,000 to $270,000 range will stand out.
Once you’ve found your price band, make your price even more attractive, psychologically speaking, by setting it just a tad bit below a rounded number. Research suggests that buyers are more attracted to prices that don’t end in what’s known as a “century number” such as 100, 500, etc.; in fact, multiple studies indicate that not crossing that century number threshold boosts sales by up to 24 percent.
Take advantage of this human quirk and choose a magical price that’ll draw buyers in. For instance, if you were considering asking $190,000 for your home, set a price of $189,900 instead. The monetary difference is negligible to you, but the allure of perceived savings may just draw more potential buyers in.
Avoid These Pricing Pitfalls
OverpricingAlong with research and data collection, the price-setting process requires strategic thinking. After all, the price you set sends a message to potential buyers: This is the highest price that you’ll have to pay for my house if you want to purchase it. But buyers aren’t just looking at your home -- rather, they’re probably viewing multiple, similarly priced properties, and today’s buyers tend to be computer-savvy and knowledgeable about the home buying process. So if your home is overpriced, they’ll know it.
Don’t overprice your home on purpose in hopes of testing the market – and getting that one-in-a-million offer -- or because you feel like you can afford to wait and lower the price later. The first 10 days after you list your home generate the most activity, and that’s when most potential buyers are most likely to check out your listing.
Overpriced homes are more likely to linger on the market for weeks, months or longer. Buyers and their real estate agents will notice the lag and assume that your property has problems. This may lead to a low-ball offer when (and if) one finally comes. And when your home has been sitting unsold, generating costs, you’re more likely to feel desperate and accept a too-low offer.
You’ll also have the inconvenience of having to keep your home in show-ready condition for a longer period of time. Avoid the stress by pricing right the first time around.
Leave Emotions at the DoorSet a price for your home through the view of an objective eye. Of course, you’ve invested a lot of effort, time and money into transforming your house into a home. Potential buyers, however, aren’t going to share your sentimental feelings.
Put yourself in a prospect's shoes: It doesn’t matter how much fun your family had in the home, how hard you worked installing that tile backsplash, what you paid for the property, or how much you need to make for the down payment on your next home. Instead, a buyer’s concern lies in getting the best deal for the lowing asking price. So check your emotions at the door and try to leave your personal attachments out of the home-pricing process. Instead, focus on the information and statistics you’ll glean as you research local market conditions – and treat your home sale as a business transaction.
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