Setting Your Home’s Price: More Science than Art
A major home-selling decision arrives right at the start: setting your home’s price. It’s a step that can be decisive for good or for ill.
But what is the “right” price? We know what it probably isn’t—it’s not the first number that pops into your head, nor is it likely to be The-Price-of-Your-Next-House-Plus-the Cost-of-a-Family-Vacation-in-Tahiti-Plus-the-New-Sportscar-You’ve-Always-Wanted-to-Own. It’s also not a price that will ‘test the market’ (to make sure there hasn’t been an upward spike in demand since the last comparable neighborhood home sold).
Setting a home’s price in the right ballpark can be easier than many people assume. You can get there by a number of different routes, most of them tied to recent neighborhood history:
Setting a home’s price doesn’t take place in a vacuum: first come the buyers you need to attract. If your property is priced significantly above the market, your ‘market test’ will tell you that only uninformed prospects—or no prospects—are interested in pursuing an offer. An out-of-whack asking price can also be taken as evidence that the seller (you) aren’t really interested in making a deal happen, which will make professionals less likely to present it to qualified buyers.
AIDING THE COMPETITION
By setting your home’s price significantly above the competition, you do everyone else in the neighborhood a terrific marketing favor. Even prospective buyers who appreciate your home’s innate qualities may be unable to resist what suddenly looks like a real bargain-basement buy just down the street!
APPRAISAL REALITY CHECK
Even if you do interest a willing buyer, unless he or she belongs to Warren Buffett’s country club, a likely next step will involve a mortgage lender’s appraisal. Setting a home’s price above any neighborhood comparable can mean an appraisal that comes in below the agreed-upon purchase price. Even if that doesn’t kill the sale through a loan denial, the buyer is likely to be penalized through a higher down payment or interest rate— either of which can play taps for your sale.
IT’S ONLY MONEY
Another (and perhaps the most persuasive) reason to right-price your home is monetary. History shows that overpricing generally yields proceeds that are significantly below those set more aggressively right from the start. It’s pure human nature: successive price reductions look like desperation—which invites low-ball offers or a much lower offer than you would have got.
If you are actively debating how to make the best of this spring’s selling season, give me a call. Together we can map out a strategy that works!