Thursday, November 11, 2010

Setting the right price for your home

Aside from choosing the right agent, the most significant decision you will make when you put your home on the market, is choosing the listing price. Price your home too high, and it will languish on the market. Price your home too low, and you leave money on the table.

So why is it so difficult to determine the right price from the start?
Here are the top 5 reasons:

5.  Variables in seller motivation
A seller who is not highly motivated to move -- one who just wants to see how much they could get -- will probably not be willing to set a realistic price for their home.

4.  Seller & agent objectivity
Human nature dictates that we tend to place higher value on things that belong to us. Both the seller and the agent have a vested interest in believing that the property is worth more than it might actually be.

3.  There are no perfect "comps" (comparable properties)
Even if the house next door is a mirror image of yours and just sold last week, there are differences that will make your home worth more or less money to buyers.

2.  Limited to "stock on-hand"
In addition to an absence of perfect comps, the agent is confined by the market itself. If home sales are slow, it may be difficult to find even imperfect comps.

1.  Agent's crystal ball is in the shop
While it is possible to predict general market trends to a certain degree, no one is able to precisely forecast how quickly prices will go up or down. A price that accurately reflects market value on the day you list your home, may need to be adjusted within weeks, or even days.

Those are just a few of the factors to consider when working with your agent to set the appropriate listing price for your home.

Here are the top 5 factors you should DISREGARD when determining the listing price:

5.  The amount your neighbor's house sold for a year ago
Whether home prices are going up or down, they are constantly changing. Any sale that closed 6+ months ago, is no longer useful for comparison's sake. Appraisers are often limited to considering homes that have sold in the past 90 days.

4.  The amount you paid for your home
Again, assuming you have lived in your home for more than 3 months, the market in which you are selling is different than when you purchased. Most homes appreciate in value, but some do not.

3.  The amount you "need" to make from the sale of your home
Take this figure into consideration when deciding IF you should list your home, but once you decide to list, it has no further significance to anyone but you; certainly not to the buyer.

2.  The amount you invested in upgrades and improvements
Remodeling comes with many rewards, but getting your money back is not usually one of them. Traditionally, kitchen and bathroom remodels net the highest return and may make your home more salable, but even those are unlikely to boost your home's value into another bracket.

1.  The amount you and your agent would LIKE it to be worth
Listing at a pie-in-the-sky price only hurts you in the long run, and your agent should make that clear to you. The notion that "they can always offer less" is fine in theory, but if prospective buyers -- most of whom search online before ever getting in the car -- perceive that you are asking too much, they will simply click on the next home, especially in the current buyers' market. The price you set needs to convey a good value. If you really want to sell quickly, your price should be 10% below the current market value.

If you would like a comprehensive market analysis of your home, applying the above principles, text or call me at 206-708-9800.

No comments: