Mistakes To Avoid When Pricing Your Home
Updated: Jul 14, 2020
You have decided to Sell your Home and it's time to make a decision on just how much you're going to ask. Your Opening List Price will have quite an impact on the entire Selling Process, so getting it right is important.
The end goal is to Sell your Home at a Fair Market Price within a Reasonable Amount of Time. The Last scenario anyone wants to endure is a Home sitting on the Market, gathering cobwebs. That's not to say there aren't other reasons a Home will sit on the Market, but the Asking Price is the most important Sales Tool in a Real Estate transaction.
Here are a few mistakes Home Owners tend to make when pricing their Home for Sale.
Pricing Your Home High Will Diminish The Buyer Pool
The Market Value of your Home is $380,000.00 but you price it at $410,000.00 just to see if anyone will be interested in it at that price. Any Buyer that has a top end budget of $400,000 and a Home Search set up to include only homes of $400,000 or less will not see your Home in their search. So even though you are willing to accept an offer under $400,000 and the Home is actually within their budget, it's unbeknownst to them. Generally speaking, the higher the List Price, the Fewer the Buyers.
Pricing Your Home Without Considering The Current Market
Buyers are well aware of the type of Market they are buying in, and this will be reflected in their decisions. If a Home is priced high, they will typically move on to other Homes similar to yours, instead of seriously considering yours.
Pricing Your Home Without Having a Current Market Analysis Done
The most reliable method of determining the Market Value of your Home is with a Current Market Evaluation. A CMA provides a Recommended List Price and is substantiated with historical and current data on Homes that are similar to yours, and in the same area.
Some Factors that are considered are: The listings that have recently sold, which indicates what a Buyer is willing to pay for a Home similar to yours; Any listings that have expired or been withdrawn, as this can shed light on what a Buyer Isn't Willing To Pay for a Home Similar to yours; and Active Listings that are similar to yours to ensure you will not be helping other Listings Sell First. A CMA is a valuable tool to get your listing price right.
Pricing High to Leave Room for Negotiating
Once a Client has expressed serious interest in a Home, my first order of business is to see how that Home compares to other homes similar to it. I look at all of the same data as I would if I were completing a CMA for a Listing, and share those findings with my Buyer. More often than not, if it's priced high to allow room for negotiation, a Buyer will choose to look elsewhere rather than write an offer. It's also more common than you might think that when a Home is priced at Fair Market Value, it may receive Multiple Offers. Multiple Offers can drive the Price Up as Buyer's compete for the Home.
Pricing High Because You're Not in a Hurry to Sell
Pricing your Home high because you aren't in a hurry to sell in the hopes someone will come along and offer asking price, will cost you in the long run. No matter the Market, if a Home is overpriced the Buyers will know it. Meanwhile, you've wasted the precious time during the first few weeks of a New Listing when excitement is at it's peak. Eventually, your Home will develop a "stigma" as it's sat on the Market for an extended period of time and you'll need to either drop your price or take it off the Market. The MLS® keeps track of this activity, so if you decide to list your Home for Sale again, it will show up in the history. This suggests to Buyers that there were issues as the Home didn't sell the first time, so they will view it with the idea in mind that there could be a deal to be had. What seems like a harmless decision to list high ends up giving you long term grief. It really is best to wait until you are ready to sell your Home rather than listing it and pricing it high with the frame of mind that you "aren't in a hurry to sell".
Going With The Real Estate Agent That Presents The Highest List Price
As the saying goes, there's one in every crowd, and the Real Estate Industry is no different. Compared to days gone by, the type of Real Estate Agent that will go into a listing meeting promising the Highest List Price are few and far between (in my humble opinion). Many of my Colleagues are excellent Real Estate Agents and Great People. However, should you run across a situation where you are choosing the Agent that says they can get the highest price for your Home, and the price they are suggesting is significantly higher than other Agents you have interviewed, you might rethink your strategy.
Deal Falls Through On Appraisal
Let's say a Buyer does happen along and writes an Offer on your Home that is close to the High Price you are asking. You accept the Offer and the Buyer is off to see their Banker to finalize the Mortgage. The Mortgage Specialist completes an Appraisal to find the Offer Amount to be $20,000 more than the Appraised Value of the Home. The Buyer is now required to pay the difference between the Appraised Value and the Offer Price, $20,000, or let the deal fall through. Likely, the Buyer will opt to let the deal fall through.
Ultimately, my goal as representative, is to determine a Fair Market Value for your Home that accomplishes two things: It does not leave money on the table and it does not scare away potential Buyer's. You, as Seller, have the final say. I hope this article helps you to make a sound decision on the Opening List Price of your Home by taking into consideration these common mistakes.
Signed Off in Saskatoon, Saskatchewan