Selling?
What You Should Know About Setting Your Price
If you're selling your house, one of the first steps
you'll take is setting an asking price, a maneuver that requires the ability to find the
perfect balance between attracting solid offers and ultimately receiving top dollar.
If you're working with a REALTOR® or other industry professional, you'll probably hear
talk of fair market value, which typically means the highest value an educated buyer will
pay. Fair market value is usually not the asking price.
Many agents will begin by conducting a competitive market analysis of your house and
give you an estimate of the fair market value of your home, which is a range that will
fluctuate depending on the housing market in your area and how much similar homes in your
neighborhood are selling for.
If you're in a hot seller's market, you'll have the advantage.
While overpricing to some degree can be beneficial, you'll still want to be careful and
avoid pricing your home too high, which almost always is nonproductive.
As you work with your agent and set your price, you'll want to recognize the factors
that may prompt you to raise your asking price too much when it isn't warranted. Some of
those factors include:
Upgrades have been added. While many home improvements will help you recoup a good
chunk of your investment, it won't give you 100 percent of what you paid. Also, the more
personal the improvement - a swimming pool, a sunroom, purple floors - the less likely it
will be viewed favorably by potential buyers.
- The need for money.
- You're moving to a higher-priced area.
- The original purchase price was too high.
- The seller lacks factual comparable sales to prove what the market value is.
- The seller wants bargaining room (listing more than 1-3 percent above market value
actually reduces bargaining power).
- An unnecessary move, so you're not motivated.
On the other hand, if you're in a
neutral or buyer's market, you'll really need to be cautious in setting your price.
Generally, the asking price - the price advertised when it goes on the market - is set
slightly higher than market value, usually 1 to 3 percent above market value.
You should assume that negotiation will be necessary to reach an agreement with the
buyer. If you price your home too much above market value, you'll get fewer showings and
offers in which the potential buyer is fishing to determine how low you'll go.
You'll want to establish your priority list: Are you more concerned with selling
quickly or getting the most money possible? You'll also want to contemplate whether you'd
pay that amount if you were a buyer.
Your agent, as well as friends, relatives, and neighbors, will help you point out your
house's advantages and disadvantages that you may not have thought about because you're
too close to the house and not as objective as others.
A third party will help you think of your house as a commodity - something with
positive and negative selling points. At that point you can decide on a price that you
deem competitive and in line with what other houses in your area have sold for.
