Pricing Your Home

Pricing your home is potentially the most sensitive topic you and your realtor will discuss during the real estate process, which will require your mutual agreement.  Before a price can be determined, it will be necessary for your realtor to research all recent real estate activities in your area.  The data obtained through research by your realtor will help you determine the right price for your home.  Perhaps the biggest conflict faced in this process is when homeowners unfailingly believe that their home is worth more than what the market will offer.  An expert realtor will recognize the increased level of sensitivity when discussing what your listing price should be.  As a result, they will have a substantial amount of supporting documentation with them to solidify their justification of what is the fair market price of the home. 

Homeowners are inclined to be emotionally attached to their homes, and believe that the value of their home is higher than the facts indicated by the market.  Presuming your value to be the true home value is the biggest mistake you can make during your pricing process.  It is best to keep an open mind and regard the hard facts presented to you by your realtor.  Once you have all of the facts in your situation, you can collaborate with your realtor to determine a sensible price.      

In today’s market there are a number of determining facets in the overall price of your home.  In real estate the concept of time is crucial in determining the best price for your home.  The term “timing” can have several different meanings; in real estate, it can refer to when you decide to put your home on the market.  Real Estate will have its own economic cycle which can be documented and used to your advantage.  The economic cycle will vary slightly, depending on your geographical location, but generally homes sold in the summer will bring in a higher price than homes sold in the winter.  This pattern exists because people are more likely to buy a home during the mild and stable weather months, as opposed to the turbulent and unpredictable weather months.  Depending on the season of the year, buyers can be committed to numerous personal responsibilities, like having their kids in school or holidays and other special events.  The bottom line, however, is that people are simply less likely to buy in the winter.

“Timing” can also be related to how quickly a home is purchased and then put back on the market.  If you put your home back on the market too soon, you may instill certain lending limitations for future buyers.  Lenders tend to frown upon homes rumored to be “fixed and flipped homes”, which will then initiate additional required documentation.  Buyers also tend to be very cautious with homes that have been put back on the market in an all too brief amount of time, which will then impact the selling price of the home. 

Another component in “timing” is the length of time the home has been listed on the market.  Value will always be higher at the start of your listing period, and will begin decreasing in value the longer the home remains on the market.  This explains why it is so critical to put the right price on your home from the very start.  The number of interested buyers will be higher on homes that have been newly listed than it will be on homes that have been on the market for some time.  When you have more interested buyers looking at your home, the potential for selling your home increases; hence, it will reduce the lost value created when your home has for too long persisted in inventory.  Remember: every month your home stays on the market a new monthly mortgage payment comes due.  Sellers that are serious about selling their home will need to price the home aggressively enough, to attract serious buyers sooner, rather than later. 

Another problem plaguing homeowners in their pricing strategies is when some people begin counting the proceeds from the sale of their home before an acceptable offer is made.  People begin to daydream about what all of the funds will be able to do for them once the home is sold.  Pondering about what bills will be paid off or what extra money can be applied to your next home will be only a dream--not a reality, if the price is not right.  If you think about it, a lot of nothing is still just nothing.  The best price for your home will be the highest price point that can be achieved, while still attracting enough buyers to generate an offer.  An offer can be restricted, so when an offer is made you should seriously appraise it.  You will need to determine the acceptability of the offer.  As a reminder, most offers will initially appear lower than what you would have expected.  You should not allow emotion to cloud your judgment. If the price offered is too low, it is judicious for you to reject the offer.  In the same vein, if the offer appears close to what you would have expected, then appropriate consideration of the offer will increase your profit potential.  A word of caution: do not allow yourself to be too greedy.  For example, if an offer comes in $1000 below what was expected and the home is selling for $250,000, you should probably not haggle for that extra $1000.  Sellers can find themselves needlessly squabbling with buyers over small incremental amounts.  This is especially true if you had predetermined the things you would do with the funds before there was even an offer made.  This is an example of why daydreaming can be a deterrent and how emotion can have a serious influence.  You do not want to have your buyers moving on to the next home, because a loss of a potential buyer and the inevitable wait for a new buyer will possibly cost you more in the long run.  In a tough market you should be willing to take any offer that matches or is within the proximity of your asking price.  Your #1 priority should be to sell your home. You have no way of knowing how long it will take to find the next potential buyer.   

In order to generate the best price possible for your home you will need to understand the current market demand.  In a low demand market, you will need to implement a way to separate and differentiate yourself from other competing sellers.  You can start the process by identifying what everyone else is doing and then do something different.  The real estate market is a mature industry, so it can be a daunting task to find something different.  I always recommend that a seller start out by looking beyond their geographical markets to observe what might be working in other real estate markets.  What is considered an old idea somewhere else might be an innovative idea in your area.  Be creative, but don’t be afraid to jump out ahead of the pack by offering what no one else has offered. Try offering incentives, such as a new 48 inch HD TV, 4% buyer agent commissions, professional staging, virtual tours, free appraisal/inspection/warranty, and anything else you can think of that will entice more potential buyers to your home.  If you have to compete then do it--don’t sit idly by with your fingers crossed like the rest of the population. Bring the buyers to you.

Knowing who your competition is enables you to expand the price range of your home.  Most of the information needed to analyze the competition will be presented to you by your realtor.  Your realtor will dispense market detail reports that will reference the following information: number of homes listed, listed sales price, specifications of these homes, and number of homes sold over time.  The data should be used to ensure that you are pricing your home in line with other homes in your area.  The data will also give you an opportunity to see what features differentiate you from the other homes; thereby, you can communicate the difference more thunderous than anyone else.  If you have the biggest home in that price range, then proclaim it.  If your home is the only home that has a pool, then showcase it.  And if your home is priced better than any other comparable home, then highlight it.  The only way to defeat the competition is to know their strategies and to set in motion new strategies that will exploit their weaknesses. 

There are so many different techniques and opinions related to properly pricing your home.  The goal in pricing your home should be to attain the highest price allowed in the shortest amount of time.  This will net you the highest net profit potential.  Regardless of what techniques you decide to use while pricing your home, you should always do your research.  When you have completed your research do not approach your strategies halfway.  Take your strategies to their fullest extent and do not stop until you have sold your home.