The reality is your home is only worth what the market will bear. The challenge is to determine what that is. A Comparative Market Analysis (CMA) prepared by a trusted Realtor® can provide you with the information you need to price your home. CMAs are often offered as a free service by Realtors. If prepared by a one who knows your market you will receive a fairly accurate range within which you can price your home. Pay attention to the average amount of time homes are on the market in your immediate area. This will also help you determine where to set your asking price.
If home prices are trending upwards you may be tempted to set your price high. However, overprice your home and risk having it sit on the market too long – which could be a very costly mistake both in time and money. Even if you do get an offer, the home may not appraise at the higher price which may make it impossible for the buyer to secure financing. Overpricing your home can make you appear unreasonable or unknowledgeable. Many buyers will not make an offer because they are concerned you will be insulted.
If your home sits on the market for a long period of time some buyers may assume you are getting desperate. That’s when the below-market offers start to appear, which can be very discouraging. After a while you will have to lower your price. By then you may have missed a few opportunities to have sold your home. I have seen some overpriced homes taken off the market for a period of time and then relisted at a more competitive price – a lot of time and money wasted. Don’t base your price high because the market trending upwards. If prices are trending upwards, buyers will make offers accordingly and bid price up to what the market will bear.
I recommend my clients to price in the upper-range only if there is something about their home that makes it stand out from the competition, such as a more desirable model or floor plan, or their home is in a much-sought-after neighborhood with very low inventory.
Some real estate agents will suggest a high price for your home in an attempt to get you to sign a listing contract with them. The plan is to get the listing and when no offers are made within a certain timeframe, say 3 months, they will recommend a price change and use the price reduction to market your home: “PRICE REDUCTION – SELLERS ARE MOTIVATED!” Some unethical agents like to overprice homes hoping to generate buyer leads for other properties. The longer the home stays on the market the more buyer leads it may generate.
If there are a fair number of similar properties selling within a reasonable amount of time in your neighborhood then pricing slightly below the middle of the range is recommended. However, if you need to sell quickly, set the price lower or even below the bottom of the price range to generate a lot of interest. In a seller’s market or in a market where prices are trending upwards, this strategy may produce multiple offers and even a bidding war. The market will bring the price up. If you price your home in the lower range when the market is trending lower you will be ahead of the trend making it more likely that you will sell your home before the market falls further. And you don’t want to be caught in a situation where you must continually reduce the price, chasing the trend.
Things to remember:
- The real estate market is local. What is happening in New York has very little bearing on what is happening in Miami. In fact, even markets in adjacent neighborhoods can perform differently.
- You cannot sell your home for any more than a buyer is willing and able to pay.
- Even the most seasoned professional can not accurately predict the market.
- Price your home right and the buyers will pay what the market will bear.