Strategically pricing your home to get top market value
Determining the best asking price for a home is one of the most challenging, and also important, aspects of selling it. In fact, it’s a balancing act. You don’t want to set a price that’s so high that it discourages showings and serious offers from the very qualified, motivated buyers who would ultimately determine your property’s top market value. On the other hand, you don’t want to set a price that’s so low that it attracts lots of interest, but sets the stage for offers and negotiations that could result in your getting less than the market would actually support if you were a little more aggressive.
Moreover, this balancing act is even trickier now, given that we’re still in a buyers’ market that is fraught with a variety of economic uncertainties. All the more reason why, when you make your decision to sell, you should do plenty of research as well as seek out the advice of one or more experienced REALTORS® and financial professionals.
So What’s Your Home Really Worth?
In a perfect world, your home’s value would be everything you think and need it to be. Perhaps you have specific financial goals or you’ve just made an offer on another home that’s is dependent on selling your home at a certain price in a given time frame. However, simply put, your home’s value is not determined by you, but by what the market is willing to pay for it at a given time. These days, the market increasingly includes home buyers who have researched property values over the internet for months, have already viewed at least 10 homes, and are not under any pressure to buy. Indeed, they may be quite hesitant in hopes of missing out on one of those unbelievable deals that continue to pop up.
In trying to determine your home’s true market value and, as such, set your expectations for what you’re likely to sell it for, you should:
- Try to be impartial. Unfortunately, the market is not interested in what you originally paid for your home, or how much you need to sell it for to buy your next home and meet your financial goals. In addition, your home may have features that you highly value, but which might actually reduce its market value by limiting the number of potential buyers.
- Remember why you are selling. Do you want to sell or do you need to sell? While in a buyers’ market you’ll seldom get more money than is required to meet your financial needs. Unfortunately your personal situation may dictate that you take less money than the market would otherwise be willing to give you if you had more time.
- Research online and in person. You can find out a lot about your local market through research at websites like REALTOR.com®, the premier online destination for real estate information, as well as by going to open houses in your area and making comparisons with your home in terms of location, size, features and condition.
Get a Comparative Market Analysis (CMA) From a REALTOR®
A Comparative Market Analysis (CMA) is a document, drawn from a local Multiple Listings Service (MLS) database, that presents pricing information,
property details and photos of homes similar to yours (termed “comparables”) that recently sold, failed to sell, or are currently on the market in your area.
A REALTOR® will typically provide you with a CMA as part of a listing presentation he or she delivers at your home in hopes of being able to exclusively represent your interests when you sell. This CMA will include the price or price range that the REALTOR® thinks you should list at, although the REALTOR® might adjust that figure on the spot if it’s the first time he or she has been in your home and had the chance to examine its layout, quality, workmanship, condition, and so on. (It’s also worth noting that REALTORS®, knowing that you don’t plan to list any time soon, are also usually happy to provide you with a Free Market Evaluation or “mini-CMA” of your home).
Generally, studying what has worked in your area – and what hasn’t – will help you to strategically price, position and stage your property so that it sells for top dollar in a reasonable time frame, with the least inconvenience for you.
Price Your Home To Sell When Its Market Exposure And Buyer Interest Are Highest
In a purely numbers sense, how you price your home will directly impact how many buyers, showings and offers you attract, as well as how easily it sells. However, the practical dynamics of attracting those qualified, motivated buyers who will pay top market value for your home is a little more complex. That’s because experience shows that you’re far more likely to get top market value if you sell your home during a certain “golden window of opportunity” during the listing. In short, timing is crucial.
With the exception of hot, sellers’ markets, homes generally attract the most interest and activity among buyer prospects and their agents during the second to fourth or fifth weeks they’re on the market.
Beyond five weeks, your home will increasingly be viewed as a stale listing – i.e. as a commodity with a history of being rejected by other buyers. Consequently, there will be less market buzz, less showings, less offers and less likelihood that you’ll get your asking price.
This is why it is crucial to price your home correctly right from the beginning so that you get and accept a solid offer during the three or four week “golden window”.
The Consequences of Overpricing at The Time You List
The strategy of overpricing your home when you list, knowing that you can reduce the price later, might seem to make sense at first glance. However, it seldom works. In fact, sellers who overprice their homes – even just 10% above market value – and then reduce the price one or more times often end up getting less than they would have if they’d priced it realistically from the start.
- Fewer buyers – even if they’re otherwise attracted to your home – will respond to the online and offline marketing of it if they know it’s overpriced.
- Fewer agents will show your home to their buyers if they know it’s overpriced.
- The right buyers – i.e. looking to buy a home like yours – may never even view it because they’ll confine their search to a lesser price range where yours should be.
- You’ll attract the wrong buyers – i.e those looking in your price range – who won’t be interested in your home, having viewed other homes truly worth what you’re asking for yours.
- An excessive price on your property makes others more attractive – i.e. both those priced where yours is, and also those priced where yours should be.
- You’ll get fewer – if any – serious offers overall because buyers may consider doing so a waste of time.
- Even if you do get a serious offer, the excessive price can lead to a mortgage rejection for the buyer once the lender has a professional appraisal done on your home. This leads to critical lost time waiting for finance approvals that never go through.
- Reducing the price after buyers have begun to perceive your home as a stale listing will not generate as much interest as if you’d priced it properly from the start.
The Bottom Line: Realistic Pricing IS Strategic Pricing!
All this is why, pricing your home realistically right from the beginning – to coincide with its window of maximum market exposure so that you can best leverage buyer interest and emotions – is important, particularly in a market like this one.
If you do so, you’ll not only attract more buyers, you’ll attract the right buyers:
qualified, motivated and willing to pay top market value for your home at the very time during the listing when you’re most likely to get it.