Correctly pricing a home is key to get the highest price possible for your home.
Price is the largest factor when a buyer decide to make an offer. In digital era and our fast paced markets, a well-priced home attracts the most buyers. Therefore, listing price is the most affective marketing element.
Pricing strategies vary enormously with market conditions. When pricing a home, we analyze a myriad of factors from a 360 degree angle and leave no money on the table. These factors include your home features, your competitors – similar homes currently on the market, demand – active buyers at certain price levels in the area, recent sold and unsold similar homes, the time of the year, local and national market trends, economic indicators – interest rates, employment, population migrations, construction / remodeling costs, etc.
The length of time your property on the market may also affect the selling price you receive. Pricing your home competitively from the start will create more activity among buyers, and motivate buyers to make offers fast.
On the contrary, overvaluing the property deprives the seller of the opportunity to have buyers consider the property for purchase. Moreover, overpricing your house in the belief that you can reduce the price back later is a strategy that can backfire badly.
For example, by the time you reduce your price, you may miss out on a surge of interest in properties like yours. Also, if prices are lowered, buyers may wonder if there’s something wrong with the property that kept other buyers away. You only help your neighbors to sell.
So to keep from selling your property at below market value and from wasting valuable time, don’t fall into the overpricing trap.
 | When setting a price for your property, the listing level must strike a balance between the seller’s need to achieve the best-possible return and the buyer’s need to get good value. Establishing market value The market value of your property is determined in exactly the same way as any other commodity – what a buyer is willing to pay for it in today’s market. Despite the price you paid originally, or the value of any improvements you may have made, the value is determined by the interaction between demand and supply. Look at the competition Buyers look at about a dozen properties on average before making an offer on a property. As a result, they have a good overview of the market and will compare your property against the competition. If it’s not in line with similar properties that are available, buyers won’t consider it good value for money. In short, a buyer determines the value by looking at the price of your home based on its features and benefits and then comparing it to homes with similar features and benefits that are currently listed for sale and have sold recently. |
The Comparative Market Analysis will help to determine the correct selling price of your home. Ultimately, the correct selling price is the highest possible price a buyer will accept. This market analysis is divided into four categories:
- Comparable homes that are currently for sale (Active)
- Comparable homes that are currently pending (Pending)
- Comparable homes that failed to sell (Expired and Withdrawn)
- Comparable homes that were recently sold (Sold)
Looking at similar homes that are currently offered for sale, we can assess the alternatives that a serious buyer has from which to choose. We can also be sure that we are not underpricing your home.
Looking at similar homes that are currently pending, we can see which properties were chosen by the buyers among the available inventory. This is an indication of buyers choosing the properties that are priced within the fair market value range, being in the right location, and having the desired condition.
Looking at similar homes that failed to sell, we can avoid pricing at a level that would not attract buyers.
Looking at similar homes that were sold in the past few months, we can see a clear picture of how the market has valued homes that are comparable to yours. Banks and other lending institutions also analyze these sales to determine how much they can lend to qualified buyers.
This Comparative Market Analysis has been carefully prepared for you, analyzing homes similar to yours. The aim of this market analysis is to achieve the maximum selling price for your home, while being able to sell your home within a relatively short period of time.
Local Customs and Sellers vs Buyers’ Expectation
General market analysis can shed light on local customs such as, what is average seller’s pricing strategy (i.e. price to sell), what is sellers and buyers’ expectation regarding the gap between the listing price and sold price, etc.
For this purpose, I study average price, median price, number of sales in quarterly, average days for sale, % of average sale price/ average list price for a specific neighborhood. Therefore, I can provide insights about the local market customs and assist you set the right price that also meets both sellers and buyers’ expectation in current market.
1. Asking Price – Percentage of Buyers
This graph illustrates the importance of pricing correctly. The centerline represents market value. As you move above this market value, you attract much smaller percentage of prospective buyers, greatly reducing your chances of a sale. Conversely, as you move below market value, you attract a much larger percentage of potential buyers.
2. Activity vs. Timing
This chart illustrates the level of excitement and interest in a new listing over time. It also demonstrates the importance of pricing correctly. When a property is first listed, it generates a very high level of interest from prospective buyers, which reduces dramatically over time. It is important to be priced correctly from the beginning, during the peak of this curve.
 | Taking Longer to Sell Houses priced above fair market value take longer to sell. Pricing your property competitively will help your property sell in the shortest time possible and thus avoid the stigma of longevity on the market. |
 | Missing Peak Selling Activity A property generates the most interest within the real estate market community when it first goes on the market. By pricing your property realistically from the beginning, you can benefit from the greatest interest among buyers and brokers. |
 | Losing Potential Buyers When priced above fair market value, fewer buyers are willing to consider your property or respond to your ad. Pricing your property competitively will help attract the greatest number of potential buyers. |
If your home is priced competitively…
You’ll receive acceptable offers quickly. But pricing your property higher than comparable listings may actually help sell your neighbor’s home faster than yours. Here are some things to consider:
How soon do you want to sell your property?
Statistics clearly prove that the narrower the gap between your agent’s estimate of value and your asking price, the sooner you’ll receive an offer.
How does your home compare to others in the area?
Your agent has access to important details about current listings and recently sold properties through the Multiple Listing Service (MLS). You can use this information to evaluate the competition you’re up against and analyze the effect of market conditions in your area. Then you can determine your price by comparing your home to ones similar in age, size, condition and location.
How much will buyers offer?
The cost of your next home, your need to pay off an existing mortgage, or your hope for a dollar-for-dollar return on home improvements won’t affect a potential buyer’s perception about the value of your home.
Buyers will assess your property through comparisons with other homes in similar condition with comparable features and amenities. Potential buyers are the true appraisers – and it’s their evaluation that matters.
If you think your house is worth “so much more” …
Unfortunately, emotion and pride of ownership have no place in the pricing process. Sellers speak of value, amount invested, and what they can afford “to take.” However, buyers focus on price, condition, and similar properties that are currently available.
Should you leave room for negotiating?
You greatly enhance the chances for a quick sale at or near your asking price when it can be substantiated by comparable sales data. You want to be sure that statistics and local brokers can justify your price. Don’t risk having agents neglect to promote your property to potentially qualified buyers simply because it’s out of their price range. Keep in mind that if you do receive an offer at an unreasonably high price, it will be tested during the appraisal and lending process.
What should you think about the first offers that come in?
Early offers can be your most realistic test of the current market. They often come from serious buyer/ agent teams who have been searching the market for a long time and know it well.
Can you plan buy and sale at the same time?
Market might change which can put you in less favorable situations in both transactions. You also need to consider the cost of not selling, tax consequences, renting home, etc. In short, chose which is easier for you first: easy to buy vs. easy to sell.
Can you add more features so that you can increase the asking price?
Buyers usually view improvements differently than a seller does. Some improvements can help attract buyers, while others don’t. For more information, please refer to Home improvements before Sale.