Pricing Your Home Correctly
The listing price of your property is the first thing buyers and their agents take into consideration. If you set your price too high at the outset, you run the risk of steering potential buyers to other competitive listings that are priced properly. From a buyer’s standpoint, the asking price generally reflects how serious you are about selling your property.
Several factors will contribute to your final decision. Initially you should compare your property to others that have sold and are currently on the market. Your agent will assist you with this process by providing you with a Comparative Market Analysis (CMA). At a minimum, the Analysis will reflect the following information:
- listings in the general area of the subject property that have sold in the past several months within a comparable price range
- asking and selling prices of listings within a comparable price range that are located in the general vicinity of the subject property
- current inventory of all properties on the market that are located in the general area
- features of each comparable property included in the Analysis
The unprecedented continual lack of listing inventory combined with continuing strong buyer demand has resulted in a sustained period of remarkable property appreciation. Pricing your property during this extraordinary period of limited sales data, makes determining a listing price somewhat more subjective than it would be under normal market conditions.
Keep in mind, if you decide to interview several listing agents for pricing, beware of those who stand out due to their high valuations. In some cases, agents will present you with unrealistic high pricing simply as a means to secure your listing. If you find yourself in this situation, take a step back. If something looks to good to be true, in most cases it probably is. For this reason, it is important to carefully review each Comparative Market Analysis received in its entirety to make sure the supporting information is realistic. Once you are comfortable with the contents of each Analysis you will now be able to make an informed decision when choosing your agent and pricing your property.
Properly pricing your property based upon current market conditions is the most affective way to kick off the sales process.
The Risks of Wrong Pricing
When you list your property with a reliable real estate agent it’s immediately exposed to thousands of buyer agents and their clients directly through the MLS and a new listing broadcast email is circulated among all the regional agents. Your property information is also promptly distributed through the MLS’s automatic listing update service via email which is utilized by the majority of buyers today. The information is then forwarded from the MLS to many third-party real estate search services giving your property even greater exposure. During the first couple of weeks, you should expect a flurry of activity from agents and potential buyers
However, if your property isn’t priced right this may not happen. When your listing is perceived as being overpriced by other agents who are well versed in real estate values in the general area, they may very well consider viewing your property a waste of their clients’ time and choose to direct their efforts towards properties that are market priced. The end result of improperly pricing a property could lead to some or all of the following:
- Attraction of fewer buyers
- The receipt of fewer offers, if any
- Initial momentum could be lost and marketing time prolonged
- Make properly priced listings look more appealing by comparison
- If an overpriced property does happen to go under contract for an above market value, there’s a chance it may not appraise, negatively impacting a buyer’s financing
- An overpriced property will likely sell over time, but the final selling price could fall short compared to what it may have sold for if it had been priced right from the outset
"Buying A Listing": A sales practice to avoid
Beware of agents who recommend a listing price above market value and then casually suggest that your price can easily be reduced if it doesn’t happen to sell. Pursuing this particular strategy may not work in your favor if you are expecting to sell your property sooner than later since many buyers are attracted to listings that are market priced. This higher price strategy may also lead to a much longer period on the market. Keep in mind, even if you receive an inflated offer and financing is involved, your property must appraise for the contract sales price in order to meet the mortgage requirements, otherwise the deal will likely fall through.
In some rare cases even a well-intentioned, experienced agent can be influenced by the emotional pressure from a property owner to consider pricing a property higher than one’s better judgement. But unfortunately, there are a number of agents who have no conscience and choose to routinely use this poor higher sales tactic called “buying a listing”. In other words, the agent “buys” the listing by suggesting a higher sales price than other agents recommend and/or the market currently supports simply to secure the listing.
With this in mind, it certainly pays to choose an honest, experienced agent to work with who will suggest a realistic market price based upon current supporting comparative listing information derived directly from the MLS data base. For an in-depth overview of my expertise and broad real estate related experience simply click on About Me.
Remember the Benefits of Pricing Your Property Correctly:
- More buyer showings likely during the first 3 weeks of heightened activity
- Greater potential for multiple offers
- Marketing time could possibly be shortened
- Property likely to attract serious buyers who are already actively searching
- Appraisal likely to validate the sales price in order to meet the mortgage loan requirement