How (and how not) to Price Your Home for Sale
Posted by Round Table Realty on Tuesday, April 23rd, 2019 at 10:24am.
It's not easy to accurately price your home for sale.
Too high and it won't get offers. Too low and you leave money on the table. Having a Realtor who can expertly price your home for you can often get you far more than you would have if you tried to price and sell it yourself! At Round Table Realty, our goal is to price your home fairly, sell it quickly, and keep the transaction smooth. But the trouble starts when clients don't entirely understand the method of pricing a home, and this usually happens when an agent does not explain the process clearly, step-by-step.
The first step to pricing a home properly is to do a competitive market analysis. Your listing agent should have done this prior to even signing with you. Taking into consideration comparable homes in your neighborhood and what they've sold for in recent months (sometimes years) is the first data point you'll need. Consider the upgrades in your home, as well as the upgrades to the neighborhood around you like new shopping malls or dining experiences. Check out recently expired listings and see if you find a pattern as to why and when they expired and at what price. Are you close to a boat ramp? Are you in a flood zone? These are all things that could increase or decrease the value of your home to buyers.
You might even consider paying to have your home appraised prior to listing it. Why? Because if the value of the offer on your home does not match the appraisal value, the bank will not lend your potential buyer the money they need to complete the transaction. Just because you think your home is worth 10% more than market value doesn't always mean it is.
These are some other common mistakes sellers make when trying to price their homes:
- You based your listing price on the Zillow estimate. We wrote a blog about this once. Zillow creates an estimated value for homes based on an algorithm and then posts that dollar amount as your "Zestimate." While Zestimates can be accurate, they don't take many factors into consideration anything beyond what public records show. This means that your home's assessed value according to tax records is part of the Zestimate you're seeing. Your home could be far more valuable, or far less valuable. There is no nuance, no human touch applied to a Zestimate. That's why it's not a data point that can be used or trusted.
- You think you need to price your home with room to negotiate. This one couldn't be further from the truth. First, pricing a home well above value in order to "negotiate" will actually lead buyers and Realtors running in the opposite direction. After all, buyers' agents also have access to comps and sales history and can tell when a home is overpriced. No one wants to start negotiating with a seller who doesn't appear to have listed their home at a reasonable asking price. Second, negotiating is only partly about the amount the buyer is paying for the home. Usually, negotiations include things like closing costs, repairs, and HOA fees. A home is worth what it's worth, and with an appraisal that reflects the price of the sale, there's little to negotiate with regards to price.
- "Just market the home creatively and you'll fetch a higher price!" Wrong. Marketing is marketing, and when people are searching for homes on the market, they're not searching for music videos. They're looking for clear, accurate pictures. They want recent information about upgrades and renovations. They want to know when there's an open house or an opportunity to see the home with their own Realtor. Creative marketing might be fun, but it isn't going to increase the value of a home.
- "Wait long enough and the perfect person will come along and buy this house." If a home hasn't gotten an offer within the first few weeks, it's safe to assume there might be something wrong with the price. Your Realtor should be gathering feedback from the other agents showing your home to quickly make adjustments to your home's price or offers included in the price (like repairs). Leaving your home on the market and "waiting for the right person" actually hinders your ability to sell the house. Buyers begin to wonder, "Why has this house been on the market for so long? What's wrong with it?" Remember, even if the "right person" did come along and make a full-priced offer on your home, it still has to appraise.
How do I know if my home is priced too high?
If you are attempting to sell your home yourself, and therefore price it yourself, there are a few tell-tale signs that your listing price isn't accurate. The first one is if you don't have any showings or interest in the first week. Almost every home that hits the market does so with anticipation (if it went into the MLS as a "coming soon"). Realtors and buyers have been watching and waiting for the day they could schedule a showing. If no one did that, there's a good chance it's because of the price.
After your home hits the market, you should expect offers to start rolling in rather quickly. If you receive more than one low offer, or if you receive no offers at all in the first three weeks, it's probably an indication that you aren't priced correctly. Often times, Realtors will leave showing feedback for you. If you're open to this feedback, you'll quickly find out if buyers find your home to be overpriced.
Did you list your home for sale and it expired before reaching the closing table? Often times, people will blame this on the market or a lack of buyers in the area. More often, though, a listing expires because it is overpriced. Find an experienced Realtor and find out if perhaps there were some issues with your price and how you can fix it before relisting your home!
Did you list your home for sale and it expired before reaching the closing table? Often times, people will blame this on the market or a lack of buyers in the area. More often, though, a listing expires because it is overpriced. Find an experienced Realtor and find out if perhaps there were some issues with your price and how you can fix it before relisting your home!
"...right now, price your listing at market value, or if you want multiple offers, or at least a chance at multiple offers, price it just under."Peter Lorimer, CEO of PLG Estate
Listing your home at an appropriate, market-value actually increases the odds of multiple offers. With more than one person vying to purchase your home, you have options and a far greater ability to negotiate based on demand. Gone are the days of pricing a home high to see where the negotiating will begin. If you don't have one already, it's time to reach out to a Round Table Realty agent and start the process of selling your home with an expert!
