If you’re a seller, your dream is to immediately get a full market value offer. But, how do you know if the price you set for your house is too high? There are so many things to consider when establishing a price, such as the neighborhood, market climate, and (of course) the house itself.
Follow these tips to make sure the price for your home is right.
Don’t let your emotions get in the way
It’s normal that you have a strong emotional attachment to the home where you raised your children, but, unfortunately, the buyers don’t.
While you might believe that it’s justified to have a higher price tag on your home, if your agent is telling you that the price is simply too high to sell, take the advice and lower it. Letting go of an emotional attachment to a house is hard, but if you decide to sell, a must.
Perhaps, instead, you think your real estate agent was simply wrong in the price they suggested. While this can happen occasionally, particularly if you have an inexperienced agent that does not know the area or market well, they probably have a good idea about what the price should be.
If you decide to set the price higher than your agent’s recommendation, read on for some more ways to tell if the price is actually too high.
Where are all the people?
If your home has been on the market for a while and hasn’t had many showing or any offers, there’s a very good chance the price is too high.
Consider that your home will almost always have more showings in June than in January, following the market pattern, and that the market will affect how many potential buyers and offers you will receive.
If you aren’t in any rush to sell and it’s a buyer’s market, consider waiting to list your property until a later date. However, if you need to sell now, the market might dictate that you drop your asking price to what potential buyers will realistically pay.
However, generally speaking, if you don’t have many showings or offers on your home after it’s been on the market a couple of months, it’s priced too high.
Priced higher than neighboring properties
This one is pretty simple. Either you or your agent should check out all the homes with similar square footage and amenities that have sold recently in your area. See what price they sold for and how long they were on the market before they sold.
Additionally, check active listings in your area, but remember that these homes aren’t guaranteed to sell for this price. If you want to price your home much higher than these comparables, it’s almost certainly a bad idea.
Your renovations might not be relevant
You may have very expensive taste and want only golden handles, but the potential buyers probably won’t share this particular fascination.
Of course, even more ‘normal’ renovations, such as putting a pool or deck in the backyard, might not earn you as much as you’d expect. According to Remodeling magazine, these projects offer an average 62% return on investment.
So the advice? Skip the remodeling project if you’re doing it for potential buyers (unless it’s something for staging, like painting the walls a neutral color). If you’re doing it just for the enjoyment of you and your family, go for it, but don’t expect to get reimbursed when you sell.
This is also true if you attempt to consider how much you paid for your house into the price now. Buyers aren’t interested in you making a profit, and the cost that you paid for the house is irrelevant to them and the current market.
So, make sure you price your home thinking rationally of the current market, not of your previous costs.
Don’t overprice to leave negotiation room
This might seem like a smart tactic, but in the days of Internet searches, it’s shooting yourself in the foot. The time of driving around neighborhoods you would like to live in and looking for “For Sale” signs are long gone.
While it’s true that some people still do this, the large majority use online searches. Additionally, every real estate agent uses an online search to scour the MLS for the perfect match.
This means that both potential buyers and their agents are entering a max price in the search engine. If your home falls outside of that price, even if you would easily negotiate down, there will be no one to negotiate with.
Also, even if the potential buyer does see your property, you might be priced too high to even get a lower, negotiable offer.
Price your home reasonably for maximum possibilities of showings and offers.
Will the appraiser agree?
This doesn’t happen until after the home is under contract, but don’t think that it’s not important.
An appraisal is a valuation of your property done by the buyer’s lender to understand the value of your home. This is to protect its financial interests on the small chance that they must foreclose on your home.
If the appraised price is far below the accepted price on your contract, there’s a chance the lender may not allow the buyer to purchase the home unless the price is lowered.
This is one reason to price your home fairly from the beginning, as a much lower appraisal amount can cause a lot of stress for both the buyer and seller.
Sometimes the appraisal will come back with an unpredictable amount that you, your agent, the buyer, and their agent won’t agree with. However, in general, you can trust your experienced agent to set a price that will help you sell your home as simply as possible.