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How to Price a Home For Sale
A new season is on the horizon, and you believe the worst of the economic downturn is over, so it’s time to sell that house you’ve been living in the last several years. You know what you want to get out of it, and you think you know what your home is worth, but it’s important to understand how to price a home for sale.
Real estate agents across North America who deal with sellers every day will be the first to tell you that many homeowners are out of touch with what their home is really worth. In fact, many home sellers are lured to use a specific real estate agent simply because he or she estimates the value of the home higher than others. Is this the right choice?
History shows: probably not. The agent who tells you how to price your home for sale and prices it higher than other agents probably just wants your listing. When that high price doesn’t result in the traffic and buyers you expect, that agent will be the first to suggest you lower your price.
This “over priced” strategy can actually backfire, both for the agent and the homeowner, but a lower price will signal to potential buyers and their agents that you are ready to deal. Starting too high may actually result in your home sitting on the market too long, forcing you to lower the price just to get people inside. This is definitely the wrong way to price your home for sale.
“If you really want to sell your home, price it a little below market value,” says Nancy Heisel, a ReMAX agent in Northern Virginia. Heisel says in certain areas where there is a lot of inventory on the market, pricing below value can create a “feeding frenzy.”
“Homeowners usually want to price high and reserve the ability to lower the cost if they don’t sell it at that price, but if they really want to sell, pricing low can actually lead to more showings, more interest, and even a bidding war,” Heisel says.
When the price is lower than comparable homes, buyers will want to see it, and they will perceive it as "a really good deal." The more potential buyers you attract, the more opportunity you have to sell it fast.
“Pricing low is the reverse of pricing it a bit high, which is usually what sellers want to do. But what sellers don’t realize when they do that is that they have moved the house out of the range of a large pool of potential buyers. Homeowners don’t want to buy the most expensive house in their price range,” Heisel says.
So how do you determine what the optimal price of your home is?
Real estate agents use a combination of pricing strategies to determine the true value of a home. In this market, it has very little to do with what you paid for it or what you “want” to get for it. Your home is only worth what someone else is willing to pay for it.
Many homeowners will decide they want to sell their house when they see the asking price on a home in their neighborhood. But asking prices and actual sales prices can often differ by tens of thousands of dollars.
Realtors use the actual sales prices of comparable homes to determine an average sales price. From that point, you can adjust up or down based on factors including upgrades, extras, or your desire to sell the home quickly.
Unfortunately, many homeowners who bought at the peak of the real estate market are finding that their homes have not appreciated. Some homeowners are actually upside down, owing more on their current mortgage than the house is worth. In that case, staying put may be the best option.
However, in a market like the one we’re in now, many agents will suggest that taking a loss on the home you are selling is okay, since chances are you will be buying your next home at a discount over what it is worth, meaning you will have the opportunity to make up the loss when you sell your next home.
No matter what method you use to price your home for sale, you need to remain flexible in your thinking. The more potential buyers who see your home, the better chance you have to sell it.
Remember: you can always turn down offers that are too low, but you can’t turn down offers if they are never made. Pricing your home too high will ensure it sits for a long time. If you want to sell, it’s best to price it to sell.
Thank you to Connie Holubar for this "How to Price a Home For Sale" article.
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