When selling a home, it’s important to determine a listing price that will attract buyers while also giving you the best return. Many home sellers make the mistake of pricing their home based on its emotional value, not the data. It’s easy to get emotional when selling a home, but it’s important to strategize a price that reflects the home’s true value and market demand. This blog should serve as a guide for determining the best asking price for your home.
One of the most important steps to pricing your home is conducting a comparative market analysis (CMA) to gain an understanding of how homes similar to yours are priced. To perform a CMA, research homes with qualities similar to yours – such as location, size, amenities (e.g. pool), upgrades, etc. Location and size are two of the main variables for CMA’s that help determine a price range for your home.
When looking at comparable homes, check to see how many days the home has been on the market (DOM). If a home has been sitting on the market for more than a month, it is likely overpriced, so you will want to take note of that when gathering figures. Realtors can perform CMA’s for home sellers with greater accuracy since they have access to off-market properties and are connected with other agents, so if you are working with a Realtor, this is a service you should expect.
At times when inventory is high and demand is low (aka “Buyer’s Market”), homes may need to be listed at a slightly lower price to stand out from competition. Listing your home at a competitive price can attract the attention of home buyers and increase the number of offers you receive. When a property receives multiple offers, the seller has more negotiation power. Remember, listing price does not always equal selling price.
When inventory is low and demand is higher (aka “Seller’s Market”), sellers may be able to list their home at a higher price, so long as it is not priced above comparable homes. However, even when demand is high, buyers are not always willing to pay more. If you price your home fairly instead, you are likely to receive several offers in a short period.
When choosing a price, try to stay away from numbers that could round your house up to a new pricing category. For example, if you want to sell your home for $2M, it may be better to list the home at $1.998M to attract more buyers. Even though there is a small difference between the two, rounding up may prevent buyers who determined to stay under $2M from seeing your home. Once you attract more buyers, you may be able to negotiate the price higher.
Many real estate websites, such as Zillow, Redfin, and Realtor.com, will give homes a projected value. These estimates can be helpful when trying to determine a starting point for your pricing strategy; however, they often don’t take factors like inventory or demand into account. As a result, it’s best not to rely solely on these numbers. Instead, do your own research by conducting a CMA, or speak with a Realtor who has experience working in your location.
Many sellers believe that reducing the asking price after their home is on the market will look bad to buyers; however, it is often the best course of action if your home is getting little to no interest. When a home sits on the market, pricing is typically the main deterrent. By lowering the listing price, your home could appear in more searches, and Realtors will be motivated to contact clients who previously saw the property. The more days on market (DOM) that a home sits, the more likely buyers are to perceive there to be an issue with the home.
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