The following article is a primer on how to price your home, the strategies you can take, and their advantages. It appears in our guide: The Home Seller's Handbook.
You may want to seek advice from a professional appraiser to help determine the fair market value of property. They do so using methods which are accepted by REALTORS®, insurance companies, builders, etc. as being reliable. A number of factors influence their appraisal.
REALTORS® help you determine your asking price based on their familiarity with the market. Based upon their opinions, you can decide what the asking price for your property should be.
These considerations typically affect your pricing:
An agent has no control over the market or average “for sale” prices, only the marketing plan.
- Never select an agent based on their recommended listing or sale price.
- Overpricing in a “seller's market” is sometimes o.k., but overpricing in a “buyer's market” is a recipe for failure. Market trends are as important as pricing, be certain your agent understands their significance. Refer to Appendix 13 – Market Trends.
- Four kinds of numbers are used to represent your property's position in the marketplace. Cost – What was paid plus any capital improvements. Price – What the seller wants. Value – What the buyer is willing to pay. Market Value – What a willing buyer and seller agree upon. Of these four numbers, when your home is for sale, only the market value is of importance to the buyer. For purchases after 1987, this frequently resulted in a loss to the seller if compared to the amount they paid for the property.
- The phenomenons of “Regression” and “Progression” of property values. Regression – An expensive house being decreased in value because of less valuable homes around it. Progression – Selling for an above normal value because there are more expensive properties or a very desirable neighbourhood nearby.
- The “Principle of Substitution” affects pricing because the value of a home improvement (e.g. ceramic tile in the hall and kitchen) is based on the value added as perceived by the potential buyer, not what it cost the owner to install.
- Make sure your agent understands the philosophy of buying up in a down market.
Here are some common reasons for overpricing:
Upgrades. Added since the property was purchased. (Usually these were purchased for the benefit or enjoyment of the seller, not for resale value.)
Need. (The need for money does not increase value.)
Original purchase price was too high. Seller paid more for the property than it was worth and www.essaywritingplace.com now it is worth no more and perhaps even less.
Real Market Value not considered. Seller lacks or chooses to ignore factual comparables used to establish real market value.
Seller wants bargaining room. (Listing more than 2% to 4% above market value actually reduces bargaining power.)
Move not necessary. (No motivation.)
The biggest impression and most impact a property makes upon both potential buyers and agents is in the first few weeks of the listing – pricing your home accurately and within 2% to 4% of market value is essential.
Benefits of proper pricing:
Faster sale (results in a higher market value in a declining market). Less inconvenience to the seller and their family. Usually results in more exposure to prospective buyers (more showings, greater interest). Increased response from salespeople (generates greater urgency). Better response from REALTORS® marketing and promotional efforts (generates more calls). Attracts more offers and sometimes competitive offers. Usually means more money to sellers.
If you found this article useful, download The Home Seller's Handbook.