There are plenty of things that you need to consider when you’re getting ready to place your house on the market. One of the critical decisions you have to make is your asking price — and that single decision is more important than you think! Set the asking price too high, and people may overlook the beauty of your home. Not only that, it sets off a chain reaction that can make it difficult for you to get the sale you need: your home sits on the market longer, which means that people look at it and wonder why it’s been sitting so long, which leads to them deciding not to look at it.
On the flip side, you don’t want to price your home too low. Ideally, you want to make as much as possible from it, whether you’re financing a new home, downsizing to something a little smaller, or need to get into a better financial situation. If you price your home too low, it may be snatched up quickly, but you’ll also lose money that you’ve invested in it in the process.
In the middle of this range is the sweet spot: the perfect price for your home that will make the most qualified buyers aware of the property. It will maximize visibility, which provides for the potential of multiple offers and the price being bid up, leading to a higher sale price for you in less time. Finding that sweet spot is also the most fair for home buyers, since the starting price is realistic and affected by market demand, not artificially inflated. Buyers will get a sense that it is worth looking at and the seller is realistic about price. As you’re finding that sweet spot for pricing your property, think about these key factors.
Factor #1: What are other homes selling at in your area? Take a look at other homes that have sold recently in your neighborhood. What was the asking price for those properties? What was the final sale price? How long was it on the market? Did they drop price or was the price bid up? When you have a good idea what similar properties have gone from, you’ll have a better idea of the price that you’ll be able to set for your home. You should also take a look at homes that are still on the market in spite of being up for sale for a while. What’s stopping them from selling? Is the asking price too high? If you want more interest in your house, setting it below the current asking price of those other homes may be the best way to encourage it.
Factor #2: What makes your home different from other houses that have sold in your area? The fact that the house up the street sold for $425,000 doesn’t necessarily mean that yours will do the same. It’s important to think about the features that your home has — or doesn’t have — in comparison to other homes in your area so that you’ll be able to set your asking price accordingly. For example, a corner lot often has more land than other homes on the street. If your house has an addition, more square footage, specific landscaping, or a complete chef’s kitchen that’s been recently updated, you can expect to tack a little more onto your asking price. On the other hand, if your house is smaller or lacking features the other houses that have sold in your neighborhood have, you might need to drop your asking price.
Factor #3: What’s the appraisal price on your home? Before putting your home on the market, you should have a good idea of what it’s worth. This will matter to your buyers, too: they won’t want to spend more for the home than its appraisal price, not to mention the fact that many banks won’t give loans over that amount.
Factor #4: Are you using a bridge pricing model or a retail sales psychology pricing model? You have probably noticed two types of pricing, numbers that are easy to remember and say — like $400,000 — and numbers that appear like those you see in retail stores — like $399,999. There is no one right answer here, but I certainly have opinions on pricing that I would be happy to discuss as it relates to your home sale. Bridge pricing aims to capture buyers on both sides of the market. For example, listing at $400,000 captures buyers looking $350,000 – $400,000 and $400,000 – $450,000. As evidence of this, pay attention to the price fields the next time you narrow your home search by price. Does the website use presets like $400,000 or do you naturally type nice round numbers? If so, you’re at risk of completely missing the $399,999 home if you’re searching $400,000 – $450,000. The other way of pricing uses retail sales psychology to make a home seem cheaper than it is, for example, pricing at $399,999. Although, with a major purchase that is relatively more complex, the influence of retail sales phycology is likely much less than it is at the grocery store and may even make the pricing less trusted by buyers. There are times when this might be a good strategy. It depends on a number of factors and is something I discuss with my sellers when I first become their agent.
Factor #5: Is it a buyer’s market or a seller’s market at the moment? A buyer’s market means that buyers are able to take their pick of the available houses, choosing the best possible deal with plenty of options on the table. A seller’s market, on the other hand, means that a wide number of buyers are competing for a handful of properties, which can often drive prices up and allow you to ask more for your home. Make sure you know whether you’re dealing with a buyer’s market or a seller’s market before setting that final price: talk with a real estate agent, check out the trends in your area over the last year, and observe how long homes typically sit on the market before selling.
A Few Other Things to Note:
As you’re setting the asking price for your property, there are a few other details that you’ll want to pay attention to. Keeping these details at the forefront of your mind will help you set the ideal price to attract buyers to your home.
- Be aware of the difference between recent sales and current listings. Current listings are the properties that yours is competing against. Those that have been on the market for a long time are a good look at what you can’t expect. Recent sales, on the other hand, are the properties that have already sold — and a realistic idea of what you can expect to receive for your home.
- Leave room to negotiate. If you set your price at $450,000 and can’t afford to accept a dime under that, you may miss out on potential lower offers or may cause an issue during the inspection resolution phase.
- Be open to adjustment. If you’ve put your house on the market, done a few viewings, and received immediate feedback that your price is too high from several different sources, adjust it as soon as possible. This is far preferable to waiting until your house has spent time sitting before you make the decision.
- Predict the market. If selling prices are on a steady decline in your area, you’ll want to price low in order to prevent the need to drop your price later, and in the meantime making your home more appealing to buyers versus other houses.
- The time of year may or may not matter. Houses are thought to be more likely to sell in spring, while winter may be a difficult time to sell a house. However, I’ve had listings that defy that logic so be careful of assuming too much. If you’re selling at a difficult time of year, make sure you market and price accordingly. Better yet, contact me to discuss the nuances as they relate to selling your home.
- It is best if your home is as close to a showroom as possible. Buyers will feel more of an emotional connection and won’t be distracted by too many seller-specific items. Of course, this is not always possible, but if you can do it you will be rewarded by a higher price and shorter listing period.
- Note price bands in your neighborhood and try to make yours stand out from the pack. If other homes are going for either $440,000-$460,000 or $480,000-$500,000, you’ve got a nice “sweet spot” in the $470,000 range.
Setting the perfect price when you put your house on the market can be a challenge. By watching the market, talking with your real estate agent, and doing your research before you set the price, you can ensure that your house will sell faster and that both you and the buyer will get the deal you’re looking for. Need a little more help getting your house ready to go? Contact me today to learn how I can help.