Basis for Selling a Home: Correct Pricing
The seller sets the price of the home, but ultimately the buyer determines the value. My job is to supply you with facts about what has sold recently and what is for sale now to help you make a decision.
Analyzing Common Seller Objections:
- “Another Agent said it was worth more.”
- This highlights the importance of getting multiple opinions but also understanding that not all agents have the same level of market analysis expertise.
- “Our home is nicer than those houses.”
- Subjective opinions about “niceness” don’t always translate to higher market value. Objective factors like square footage, lot size, and location are more influential.
- “People always offer less than asking price.”
- This is true to some extent, but a well-priced home in a strong market may receive offers at or above the asking price.
- “We can always come down on our price.”
- While true, overpricing can lead to a longer time on the market, which can ultimately result in a lower final sale price.
- “We have to get that much out of our home.”
- This focuses on the seller’s financial needs, which are separate from the market value.
- “My neighbor was able to get his price.”
- Each home sale is unique. Market conditions, specific property features, and negotiation skills all play a role.
- “Let’s try it at our price for a month or so.”
- This can be a costly mistake. Overpricing can deter potential buyers and create a perception that the property is undesirable.
- “The buyers can always make an offer.”
- While true, buyers often avoid homes that are significantly over priced.
- “We paid more than that for our home.”
- What the seller paid in the past is irrelevant to the current market value.
Accurate pricing can be hindered by several factors. Some inexperienced agents may prioritize securing a listing over providing a realistic market analysis, leading them to accept a seller’s inflated price. Additionally, misinformation from neighbors about their own sale prices can create unrealistic expectations.
Economic conditions significantly impact property values. Inflationary periods can cause rapid price increases due to economic factors, while recessions lead to price declines due to adverse economic conditions.
Emotional and psychological barriers also play a role. Sellers may fear underpricing their home, leading to a perceived loss of equity. Emotional attachment can cloud judgment, preventing sellers from objectively assessing market value. It’s crucial to understand that a property’s market value is independent of the owner’s personal needs or motivations.
Overpricing a home has numerous negative consequences. It can deter potential buyers, attract unqualified prospects, and discourage offers. It may also reduce agent activity and advertising response, and ironically, help sell competing properties by making them appear more attractively priced. Further, overpricing can lead to appraisal issues, as lenders require comparable sales to justify the loan amount and protect their investment in case of foreclosure. Ultimately, overpricing extends market time, regardless of the seller’s reasoning.
Homes typically sell fastest and for the highest price when they are accurately priced from the beginning.
It’s important to understand what does NOT determine market value. These include:
- The original purchase price.
- The current cost to rebuild the home.
- The seller’s investment in home improvements (while improvements may increase marketability, they don’t necessarily translate to a proportional increase in price).
- Personal attachment or sentimental value.
Separating personal feelings from the financial aspects of the sale is essential for determining fair market value.
Real estate professionals often have a pool of buyers actively searching for new listings. The initial 3-4 weeks of a listing are typically the most active, as buyers and agents are eager to see new properties. This period often yields the highest and best offers. After this initial surge, viewings are primarily from newly entering buyers. Therefore, strategic pricing and positioning within the first few weeks are crucial.
Market value is defined as the price a willing buyer pays to a willing seller under no undue pressure. It is important to remember that there are other types of values such as assessed value for taxes, and insured value.
Appraisers use two primary approaches to determine value:
- The cost approach, which estimates the cost to rebuild the home, factoring in depreciation.
- The market comparison approach, which analyzes recent sales of similar properties. This is the most commonly used approach.
Analyzing past sales data and current market supply and demand is essential for accurate pricing. Sellers should review comparable properties currently on the market before setting their asking price.