By Dian Hymer
Pricing your home too high for the market can cost you in the long run. Here's why. Your home is most marketable when it's new on the market. If it's priced too high, it will be shunned by buyers who don't want to waste time with an unrealistic seller.
After months on the market, your agent may convince you that the reason your home isn't selling is the price. Even with a price reduction, it's often hard to generate enthusiasm for a listing that has been on the market for awhile. When you finally do receive an offer, it could be discounted further. Buyers usually want to know how long a property has been on the market before they decide how much to offer. The longer a listing sits on the market unsold, the lower the price the buyer is likely to offer.
Sellers often have an over-inflated view of how much their home is worth. It's hard to be objective about the place you call home. But even the most realistic seller can miss the mark when it comes to setting an accurate price, particularly in a volatile market. How can you make sure that your list price is right?
Your aim is to select a price for your home so that it will sell for the most money in the least amount of time. The thought of selling a home quickly makes some sellers nervous. Yet, the homes that sell the quickest are usually those that sell for the most money.
First Time Tip: Generally, you want your list price to be within 2.5 to 5 percent of what you expect the ultimate selling price will be. Where within this range you set the price should be dictated by how much price discounting is currently occurring in your area. When there is little discounting, and listings are selling for close to the asking price, you should list close to your expected selling price.
To determine the probable selling price, ask a knowledgeable real estate agent in the area to complete a comparative market analysis (also called a CMA). This will give you information about properties similar to yours that have sold recently. You may find that in higher price ranges, the deviation between the list price and the sale price is higher, say 10 percent.
Let's say that the comparable sales information indicates that your home should sell for about $300,000 and that homes are selling close to the list price. To determine a list price that is within 2.5 percent of the expected selling price, divide $300,000 by .975. This gives you a list price of $307,000.
Pricing strategies change with the market. When home prices are rising, yesterday's comparables are out of date. Yet it can be risky to anticipate appreciation and price your home too high. To protect yourself from selling for lower than the rising market will bear, ask a realistic price and expose the listing to the market before you listen to any offers. If your list price is lower than the market will bear, buyers will bid the price up.
A different pricing strategy is required for a soft market where prices are dropping. The best bet in this case is to undercut your competition. Again, yesterday's comparables will be out of date. But, in this case, they will be too high for the current market.
The Closing: In a declining market it's better to discount your price up-front. Otherwise, you can be caught chasing a falling market, dropping your price as the market falls further.
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