In a recent article, I wrote about the importance of pricing your home right before you put it on the market. Pricing your home right is crucial for a successful sale. This article will help you with two key aspects:
- How to price your home right.
- How to promptly adjust that price if needed.
Pricing your home right
Accurate and current data is the key to getting this part right. There are two equally essential pieces of this.
- A comprehensive comparison report of homes currently listed and recently sold in your area.
- An in-depth analysis of the current market trends and forecasts.
The first item above is science––the second is art. Combining and utilizing these two things and pricing your home right is where a seasoned pro can significantly help and save you thousands.
Can you do this part yourself? Perhaps. That is akin to thinking you could work on your dental needs by watching a youtube video. Hiring a licensed professional will make things easier and fetch you a higher price. Most listing agents focus on just the first one and ignore the second. This can cause complications. However, a seasoned pro will dig deep into both.
Unusual political or economic events and what time of the year you put your house on the market may also impact various decisions while listing your home.
This is also an excellent time to pinpoint potential home improvements, their costs, and their precise impact on your home’s value if you make them. These and many other factors will determine the right listing price for your home.
The right price
When a buyer and a seller enter into a purchase and sale agreement, the lender for the buyer uses an appraiser to establish the appraised value, a calculation based on recent sales in that neighborhood. That number is the basis of the mortgage loan.
Fair Market Value is the price an independent buyer is willing to pay for a home. These two values may not always match. A listing broker’s job is to determine the highest price a potential buyer will pay and one close to the appraised value.
So, what is the ‘right price’?
It is the price that comes close to the anticipated fair market value. It is a number that gets you the most money for your house, and the appraiser can justify it. I refer to it as the top dollar that the market will support.
No real estate professional can predict the final sale price of a particular house with absolute certainty. A seasoned pro who gathers the correct data and analyzes other factors can come close. The response of the potential buyers once they see the new listing is a strong indicator of whether the price is correct.
Therefore it is crucial to have a strategy to react to real-time feedback from potential buyers.
When and how to make price adjustments
The final phase before you put the house on the market must include an in-depth conversation with your listing broker about price adjustments if needed. You must establish benchmarks for price adjustment.
There are three critical elements of the price adjustment strategy.
- Establish the timeframe and how you will collect feedback from those who view the house once it is on the market.
- If the feedback indicates that the list price may be high, adjust it quickly––within ten days of going on the market. You’ll lose buyers if an overpriced listing stays on the market too long.
- Make significant price adjustments. One large adjustment is considerably better than two or three small ones. If you have listed your house for $1,200,000.00 and the initial buyer feedback is that it is overpriced, a $20,000 price reduction will not move the needle.
Was the house truly priced right?
Something very few brokers will admit openly is the fact that often, the house is not priced right. Both the homeowner and listing broker bear responsibility for this.
It is natural for homeowners to estimate the market value of their home to be higher than what it is. After all, they may have lived there for a while, made several improvements, and placed a high value on all that. Most of us tend to think that our stuff is more valuable than it is.
Most listing brokers, especially those who may be hungry for business for various reasons, shy away from spelling things out candidly. They may be eager to get the listing first and then deal with the price adjustment. This approach doesn’t help either party.
Home sellers will be better off by being realistic and trusting the data. Listing brokers will be better off being upfront and straightforward with their potential clients than fudging the number to get a listing.
I am always straightforward with my clients; many attest to that here. This approach has served me and my clients well over the years. Reach out if you have any questions or wish to discuss your specific situation.
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