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Pricing Your Home For Sale
You probably ask yourself, how can I determine my home value, and why it’s so important? Determining your home’s value is more ART than science.
To cover this big subject, we will start with simple facts and more and more we will “dive” into other things like techniques and secrets that an experienced realtor does when pricing a home.
Fact: A house is worth whatever buyer will pay for it!
For most people, a home is their largest asset. Understanding the value of the home is important if you ever want to sell, refinance or borrow against your home’s value.
Homeowners, Use online valuation tools to determine their home’s value. Zillow, Trulia, Redfin, and more, are popular websites for monitoring your home’s value. Those tools are an estimate of your property value and not an official appraisal. They take a variety of factors into calculating your property value. This includes nearby home values, sales price history, location, and real estate market trends. If a home hasn’t been sold in years and major renovations or additions have been made since then, location factors such as road noise, nearby power lines, and schools, may not be reflected in the online estimate.
Using public records like property transfers, deeds of ownership, and tax assessments along with some mathematical modeling, cannot predict accurately your home’s value based on recent sales and listing prices in the area. An accurate home evaluation can be done only with a physical home inspection done by an appraisal or an experienced realtor that knows the market.
When determining your home value (pricing), you need to be familiar with the next terms, which will help you understand better, the complete picture of the process involves in selling your home.
Market value. Market value is the current value of a home based on local sales prices that are comparable to the subject property, such as supply and demand, renovations, number of bedrooms, bathrooms, lot size, house size, age, and more. When determining market value, all the comparable sales are in the same or nearby neighborhoods and weigh the pros and cons of each sale based on the subject property to determine an estimate of what people will pay for the property.
Subjective value. Subjective value- is the minimum price that Homeowner would be willing to sell his property based on personal feelings, emotions, and considerations, like base the amount they need to get out of the deal, in order to pay off their existing mortgage balance.
The listing price is the amount that the seller has listed his house for sale on the Multiple Listing Service (MLS), based on their goals. You determine the price of your home, by looking at comparable local sales provided by professional real estate agents, by your property’s condition and improvements, location, and the current supply and demand.
You might value your home at a higher price than a buyer will pay or its true market price. A balanced market will equalize market price and market value. Selling a home, it’s an art! In order to sell your home for top dollars, you will need to have negotiation skills. Be able to answer any buyer question in a way that will trigger the buyer’s imagination and his excitement/emotions. Emotion is what really drives purchasing behaviors, and also, decision-making in general. Studies completed by neuroscientists have found that people whose brains are damaged in the area that generates emotions are incapable of making decisions. 95 percent of our purchase decision-making takes place in the subconscious mind. If the perceived value of your home by potential buyers is greater than the actual price, the more willing he is to buy. Remember: The urgency to buy disappears the closer the price and perceived value are. This means marketing the home to match the buyer’s specific needs and desires. A professional real estate agent can help you base on his experience knowing the buyer’s “Hot buttons”.
Another fact: Selling a home is a business decision!
When you’re aiming to sell your home, the market actions plan you will use, will help you set a competitive price. It will be necessary to keep close track of any changes in the market. As a home seller, you need to stay away from your emotions and look at your home, as a structure with a value. This value will be determined by you, as a home seller, or by a professional realtor that you hire to do the job for you.
Real Estate Sales Tactics and pricing strategy:
Pricing Below Market Value.
In a “cooling market” where each property is selling for less than the last, being the first to sell will in turn result in more profit. Alternatively, if your price is too high, to begin with, and the market continues to fall when you adjust your price down the road your home will be worth even less than if you just used this strategy, to begin with. In a market like this, if you’re not ahead of the curve you’ll always be chasing it. The faster that you adjust to the changing market, the more likely you will be to generate an offer and not have to deal with your home sitting stale on the market.
Price at market value:
Most sellers will aim for an appropriate list price at the current market value, drawing in roughly 60% of active buyers. Typically, most buyers purchased their homes for 100% of the asking price (with around 25% purchasing for more than the asking price). This strategy is recommended in a balanced market. Getting your listing price right from the start will ensure you have a faster sale, and likely the best sales price that the market will bear.
Most buyers are using online tools in their home search process. Once you as home sellers have an asking price in mind, tweak it ever so slightly to make sure that it will show up with the greatest frequency when buyers are searching for properties like yours and in your price range. For example, many online real estate sites set price filters for $25,000 increments. So, if you list your home at $853,000, buyers who filter their maximum price at $850,000 may not see it, even though the home is well within their budget.
Price above market value:
It’s rare to price your home about 10% to 15% above market value. “It’s very risky,”. It might show that the sellers are not motivated, and a lot of buyers will choose not to consider the listing as an option or to book a showing. It will narrow the potential buyer pool as low as 10%. In very special cases, your agent might find this appropriate, when they’re in a good school district or there’s other added value to the property that the comps don’t have. This strategy is not recommended. The sellers will lose the momentum of the best offers they can get in the first 2 weeks since they listed their home for sale. Usually, realtors will ask the sellers to reduce the price within 2 or 3 weeks after it’s been on the market. Otherwise, it will be totally waste of time.
When the market is with low supply and high demand, it’s a good pricing strategy to choose. The idea of the bidding war strategy is to list the property for sale, below market value and generate as many offers as possible to raise the price. It creates a sense of urgency and high demand for the property. By exposing the property to the highest amount of people, the idea is that you’ll generate more offers. On the other hand, it is common for buyers to provide appraisal gap coverage to secure a home in a bidding war.
Buyers are more likely to negotiate on repairs on inspection or walk away altogether. Buyers and their agent’s research market value too, so you want to hit the sweet spot in price. So you need to be realistic about your price. This strategy is recommended in the sellers’ markets.
In general, the higher you price your home above market value, the smaller your potential buyer pool gets. If you price your home too -high, you risk being on the market for too long. If you price your home too low, you risk leaving money on the table.
Home pricing strategies are really an art. You don’t have to pick one strategy, to arrive at a competitive price that works to attract buyers. Pricing your home does involve quite a bit of analysis and strategic thinking. To market your house competitively, you need to set a price based on the facts so that your listing price is in line with buyer expectations.
It’s important you find the right realtor in your area, to determine the best home pricing strategy based on your real estate goals.