Of all the variables to take into account during the home listing process - competitive rates, listing images and video, staging, etc - pricing is one of the most important. If you price a house too high, you'll have a slow trickle of ready-but-weary buyers that are interested, but may feel intimidated to offer a perceived lowball offer; price it too low, and you'll have an over-abundance of offers that could leave thousands on the table. Pricing is a catch-22: you have to price it low enough to attract buyers, but not low enough that you destroy your profit.
The first four weeks after a home officially hits the market is your best opportunity to make a sale, and price can factor into that decision more than anything else. Most home buyers these days are savvy, and have not only seen a number of houses already, but are price-shopping to try and get the best deal. For that reason, you have to stay one step ahead of them, and price your house competitively to maximize this sweet spot.
How to Set the Price
Correct pricing is all about crunching relevant numbers and using sound judgment. Having an experienced real estate agent can make all the difference in the world when it comes to pricing your house, as they will know what to ask for when it comes to your house, and why. Here are a few other things to keep in mind:
Compare With Other Recent Sales
When deciding on the best price for a house, pull the comparable listings of other recent sales from the last three months and compare them against your home. Don't go too much outside of a half-mile away from the house either, unless you live in a rural area or there aren't many comparable homes for sale. Use natural dividing lines such as highways and train tracks as boundary lines for your research, and take the age of homes into consideration. By tracking the sale prices of houses most closely aligned with your own, you'll be able to determine a starting point for your price research.
Define What Makes Your Home Unique
Hopefully, the thing that makes your house stand out from the crowd is not a purple wall inside the living room that greets prospective buyers when they walk in, but if your home is unique in a good way, highlight that in your research. Is your style current? Do you have an extra bathroom? Does your backyard have impeccable landscaping? If you have a home that causes people to gasp the moment they walk in, you may be able to charge a slightly higher price. Regardless, consider
Examine the Market
Different times call for different pricing strategies. In a buyer's market, potential homebuyers will demand a lower price from the seller in order to remain competitive, so you won't be able to get away with that 10% premium you were hoping for. By contrast, if you're in a seller's market, not only will you be able to meet your $250,000 asking price for your home, but you may able to increase it up to $265,000 or even more. Knowing the market that you're selling in will help to know how much you can ask for.
Mark the Successes and Failures
After you pull the comparable listings and sales, and look at the listing price and actual sold price, taking into account amenities, lot sizes, and other factors to determine similar aspects to yours. Also, look at the listings that expired and investigate the reasons why they didn't sell. Was their price to high? Did their brokerage not market the home efficiently? Why or why not?
Overpricing Can Be Dangerous
Generally speaking, a home usually sells within 5% of its market value, either above or below. If you're considering a premium pricing strategy - one in which you ask for more than 5% above market price - you can expect a significant amount of roadblocks ahead, such as:
Hesitation on the Part of the Buyer
The listing is your first opportunity to showcase your house to potential homebuyers, and the price is what most buyers will look for immediately to determine whether they will continue investigating or move on. If the price is too high, they may simply ignore everything else about your house.
Out-price the Market
Regardless of how nice your home is, the truth may be that most buyers simply can't afford your home if you price it too high. You may have set it that way in order to leave yourself room to negotiate, but that may also communicate to the buyer that it won't be worth their time to even try.
Difficulty With Financing
If the appraisal comes in substantially lower than the asking price, the buyer may also have trouble securing a loan in order to buy the house in the first place. This could result in legitimate buyers walking away and you missing that crucial 30-day post listing golden period.
While it's always smart to wait for the right buyer to come along, the longer a house sits on the market, the more buyers will wonder what is wrong with it in the first place. An expensive house that has sat for a long period of time can be toxic to a listing.
After sitting for a long period of time, you may be forced to simply sell the house at a lower price and move on, particularly if you're leaving the area. In this case, overpricing a house can result in nothing more than time down the drain.
Don't Be Quick to Underprice, Either
The main draw to selling a house below market price is to get rid of it quickly; the drawback to this is you could potentially leave thousands of dollars on the table. A home that is perceived as a "steal" will attract a lot of attention, potentially resulting in a bidding war, but it's still a gamble. If only a few offers trickle in, you may end up having to sell at the reduced price.
Quick Tips to Nail Your Price Using Market Analysis
When it comes to selling an asset like a house, it's never wise to simply "go with your gut" and hope for the best. Looking at your home objectively and crunching the numbers is the best way to secure a price for your house that will strike a good balance of both being tempting to buyers, while also remaining competitive for your area. Here's a few things to evaluate to get started:
Take the Total Picture of Your House
Look at your house in terms of sheer numbers: how many bathrooms and bedrooms does it have? How old is it? What's the condition of the house? Are there any improvements or extra features that are built in? How big is the garage? What's the square footage? Not only will answering these questions help you when it comes to determining comparable listings, but you'll also be able to uncover any ares that you may be able to improve on to increase your asking price.
Look at the Aesthetics
Is your home the crown jewel of your neighborhood, or is it in a state of total disrepair? Step out to the curb and look at your shrubbery, the paint, windows, roof, and examine it from the eyes of a buyer. Then, head inside and look at the condition of the walls, flooring, etc. If necessary, perform a few repairs to bring your home to its optimal condition.
Check Your Financials
After you've examined the house itself, look at your records and review the appraisal value of your home, what you bought it for (unless you built it), what the maintenance costs are, the local tax rates, and more information to make sure you're giving buyers a complete understanding of their potential investment.
Look at Comparable Homes
Once you have this information in hand, look at the comparable homes in your area and find out what they sold for, or what they're not selling for, either. Price your home within a reasonable window to maximize your sale price and minimize buyer's hesitation.
Consult a Professional
Even if you are confident in your assessment of your house, it's always a good idea to bring in a Realtor that has experience in this area. Not only will an agent be able to help you see things from a buyer's perspective, but can also navigate you along the process of selling your home, which can sometimes be a tricky process.