Setting The Asking Price For Your House
Setting the asking price for a house is one of the most important determinants of how quickly and whether your house will sell or not. The consequences of making the wrong decision are painful. If you price your house too low, you will be giving away thousands of dollars that could have been in your pocket. If you price it too high, your house will sit unsold for months (or years in some cases), developing reputation that something is wrong with the property. Failure to understand market conditions and properly price your house can cost you thousands of dollars and cause your house not to sell, ruining your moving plans. Setting the proper asking price for your house is the single biggest factor that will determine the success or failure of your home sale. The key to maximizing a home’s value is to price it correctly. When it comes to setting the price for your house do a thorough market research and analyze it properly.
1.Comparable sold properties:look at comparable homes from your neighborhood that sold within the last 6 months. If you can’t find any comps from the closest neighborhood expand the search up to 1 mile in radius. Be sure to verify the actual selling price. What you heard from your neighbors does not mean it is accurate information. Compare your house with the most comparable sold homes with regards to size, style, location (corner, main street),amenities, and condition and make adjustments by adding or subtracting $ amounts on the differences. This will give you a general idea of what your house might be worth based on the recent facts from your local market
2. Your current competition: analyze the most comparable homes from your marketplace you will be competing with. This is the most important part in selling process to keep your house competitively priced so it can be in a salable position at all times. If you price it above your competition you will be helping other sellers to sell their homes. If you price it too low you will be giving away money you could have kept in your pocket.
3. Expired properties: analyzing “expired” properties (houses that did not sell) will give you a good indication of what price you would be asking too much for your house. Again, avoid overpricing.
Ask too much, receive too little: on average, houses that are on the market for one month or less, sell for near or above asking price if priced correctly. As the market time increases, the difference between the asking price and selling price also increases. A house that is on the market for 1 to 3 months, on average, sells for about 5% less than the asking price. If the property is available 3 to 6 months, the selling price on average is about 7% less than the asking price. If the house is for sale for more than 6 months, the owner can expect to receive about 90% or less of the asking price. When the house is priced competitively at the beginning of the marketing process, the seller usually receives a greater net profit. A seller, who wants to start high to test the market and see what happens or to leave room for negotiating, often receives less than the property’s actual market value.
The hazards of overpricing include the following:
♦ Lowers buyers’ response
♦ Lengthens marketing time
♦ Minimizes offers
♦ Reduces net profits
♦ Creates a “reputation” problem
♦ Limits financing
♦ Increases risk of appraisal problems
♦ Causes frustration and inconvenience
Your property’s value: the value of a property is determined by the current marketplace (is it a depreciating, appreciation or flat market), the competing properties available to buyers, the buyers’ perception of the home’s condition and appeal, available financing, the general economic condition in the area, what buyers have been willing to pay for similar properties, and its location. The value of your property is not determined by what you have invested into the home, what you need or want out of the property, what you personally think your home is worth, a bank or tax appraisal, what you heard from your neighbor’s home sold for, its insured value or the cost of the new home you want to buy or credit cards to pay off. Real estate is always influenced by many different factors that effect the value of properties. There are four different forces that influence real estate. Physical force includes: topography, water, location, climate, and environment. Economic force includes: business cycles, economic base, supply and demand, inflation, and cost of money (interest rates). Governmental force includes: taxation, right to regulate laws, fiscal and monetary policy, government programs like FHA and VA loans. Social force includes: demographic changes, social trends, buyers tastes and standards. All those forces are constantly changing and because of this value itself is subject to constant change. That is why real estate is constantly changing, it always goes in cycles. Real estate is a simple law of supply and demand. This simple law of supply and demand implies that when supply exceeds demand, prices will fall and when demand exceeds supply, prices will rise. In real estate there is always a lag time for market forces to respond to supply and demand.
To summarize, houses that are priced correctly at the beginning of the marketing process usually sell for the best possible price with the least inconveniences.