If you’re planning on putting your home on the market, determining your asking price is one of the most important decisions you will make. Don’t be fooled into thinking you can start off with a high asking price, and then just cut the price later if you need to. If you want your house to sell quickly, overpricing is not a good strategy.
When you price your home too high, potential buyers will likely ignore the listing. Then, when you eventually drop your price, buyers will see just how long the house has been on the market and they’ll assume you’re a desperate seller (which you may be at this point). It sends the signal that there is room for even more negotiation. And if you price too low, well, no one wants to leave money on the table. So how do you go about determining a fair price?
Local market research
Sellers need to take the time to understand what’s happening in their local market. A recent survey from Zillow found that 17 percent of sellers who bought in 2007 or later were more likely to base their asking price on the price they paid for the home. But what sellers may not realize is that nationwide, home values are back to 2003 levels. So if you’re basing your sale price on what you paid in 2007, that’s likely too high a price. That’s why it’s important to look at what’s happening with home values in your area. Sites like Zillow enable you to search for and find recently sold homes, comparable to your own and check home value trends, foreclosure stats, and price-cut information so you can set your price based on local market conditions.
Check out your competition
When you drive around town, check out the active competition. Are a lot of homes for sale? At what price point and in what condition? (A real estate mobile app can help you easily obtain this information.) If you find a home similar to yours that has been for sale for a long period of time, it likely means buyers don’t think the home is priced correctly for the market. Once you see the “Sold” sign, find out how much above or below the list price it sold for. This will give you a good idea of how the market is behaving and how aggressive you can be in setting a price
Use your agent
This may seem like a no-brainer. But rather than just listening passively to what your agent recommends, or on the flip side, insisting that you know best, engage in a real conversation about what buyers are looking for in this market and how your home stacks up. Are there improvements you can make so buyers would be willing to pay a higher price? Discuss your timeline to sell and if you should price differently based on that timeline.
Have your home inspected
Yes, buyers will most likely hire a home inspector, but sellers should, too. Hire a licensed inspector to evaluate your home’s major systems (electrical, plumbing, heating, cooling, roof, etc). Nobody’s home is perfect, yet sellers are often blindsided by demands for costly repairs they didn’t anticipate on systems they have never had issues with. Often, sellers feel stuck after possibly agreeing on a purchase price of less than they originally asked. Then, once their home is under contract and off the open market for 10-20 days, they are asked to make costly repairs or reduce the price even more. On the positive side, if systems show up as being in good working order after a pre-inspection, sellers can use this information as a marketing tool.
Once you think you’ve come up with a good price, put yourself in the buyer’s shoes and see what else you could get for the asking price of your home. Often sellers are too emotionally attached to their homes to objectively place a value on the property. Once you start looking around to see what else is selling for that price, you might have a better idea of how appealing your house is in the current market.