Listing Price Considerations
The value of the property is determined by what a buyer is willing to pay and a seller is willing to accept. Buyers make their pricing decision based on comparing your property to other properties SOLD in your area. Generally, your first offer is usually your best. I always tell clients that they can price it to sit or they can price to sell. My goal is to have the house shown as much as possible. Pricing correctly will allow the home to shown as much as possible – it could even lead to a multiple offer situation. If you overprice the home it is possible that the house will sit for an extended period of time. If the house sits for an extended period of time, you risk developing a stigma (i.e. buyers will wonder why it has been on the market for so long).
Make sure when pricing the home, it is based on data. The main reasons I see homes mispriced are:
- Many sellers have an emotional attachment to their home, particularly when they built it or lived in it for a while, but when pricing it to sell one must take their emotion out of the equation because the Buyer is not going to pay for an emotional premium.
- I see sellers wanting to price their home based on what their neighbor sold theirs for. However, what they don’t want to factor in is that their neighbor sold over a year ago, and the market has changed, or that their neighbor did renovations which merited a higher price than theirs does.
- Pricing based on what their neighbors’ house is listed for. While this may seem like a reasonable way to go about it, if the neighbors’ house has been on the market for a long time (because it is overpriced) following in their footsteps is not a wise idea. I’ve heard sellers tell me before “well the house down the street was priced at $xxx.” And then I have to tell them “it was priced at that for 200 days and then was delisted being unsold.”
- Seller is using an agent that doesn’t know the area. Too many times a seller uses a family member or friend of the family who has no knowledge of the area and they may not be able to market your house to its fullest potential. For example, I was helping a buyer look at an investment property one time that was in a hot developing area and the seller’s agent told me on the phone “yeah, my sellers tell me that this area is turning.” You as the seller shouldn’t have to tell your agent that the area is turning – they should know.
Additionally, given that most buyers are using financing when purchasing a home, this means the house has to appraise for what it is contracted for. When an appraiser comes in, they will use “comps” or comparable homes (similar area, square footage, number of bedrooms/ bathrooms) that have sold in the past six months. Let’s say that a buyer comes in and offers to pay $315,000 for your home and an appraiser determines that your house is worth $285,000. The buyer will have to pay the difference because the lender will not give a loan higher than what the home is worth. If the buyer is unable or unwilling to pay the difference the transaction is unable to be completed and the earnest money is returned to the buyer. It’s not a good feeling for a Seller when they go under contract, wait 30-45 days expecting toclose only to have the deal fall through because it wasn’t able to appraise for what it needed to.