When it comes to selling your home, one of the most important factors for getting the maximum value is pricing your home correctly. Determining the right asking price is both an art and a science. We’ll explain why.
Pricing Your Home Correctly
One of the first things to remember when selling your home is that as a seller, you have an emotional investment in your home, not just a financial one. You know your house better than anyone else, and, therefore, sellers often place a higher value on their house than the market does.
As difficult as it may be, in order to maximize your sale price, sellers need to reduce the amount of emotional influence in the pricing process. Remember, listing for the wrong price often means a.) your house will sit on the market for longer, and/or b.) you will get less for your home than you want.
Asking Price vs. Market Price
A lot of real estate agents market themselves to get clients. Oftentimes, agents will advertise their track record for selling homes over the asking price. While this may sound like a good thing at first, you should really take it with a grain of salt.
We do a lot of number crunching and data diving at BlueMatch and we have never come across an agent who consistently sells homes for more than the market average.
When pricing your home correctly, you can use your asking price as part of your home sale strategy. For instance, if you’re in a hot market–like Denver or Seattle–your strategy may be to set your asking price a little bit below market value, to try to get multiple offers, which can drive up the final sale price.
What is market price anyway?
The key takeaway from that strategy is that the asking price you set is relative to the market price. The market price is the approximate cost per square foot you should expect based on your home’s characteristics, i.e. number of rooms, finishes, amenities, etc.
When you hear real estate agents talk about comparable properties (or ‘comps’) these refer to homes in your area with similar characteristics. We can look to see the price per square foot that those homes sold for and get a sense of what the market will pay for your home.
So, if we return to our example from above, because the house is listed below market price in the hopes of gaining multiple offers, it’s possible that the house could sell for over asking price, but below its market price.
If this happens it means the seller did not maximize the value of their home.
Get the Research Right
At BlueMatch, we have a number of things we do to ensure you know the actual market value of your home.
When we think about the economics of real estate, it includes both supply and demand. Most agents only focus on the supply side.
Yes, we look at comps too. This remains an important piece of the pricing puzzle, however, it’s not the only one. Most agents don’t go much further than this when doing pricing research.
We dive into the data to get a sense of what the demand for your home is. This helps us determine who is in the buying market, where they’re looking, and what their price range is in those areas.
List for What You Want
Once our clients have all the information they need, we recommend that sellers list their home for what they want. This avoids awkward situations, like when you’ve listed below market value to try to generate a bidding war, but the bidding war never happens. And instead, you end up with a single offer that’s right at your asking price. (Of course, if a bidding war does occur, beware of the appraisal gap!)
The problem is that you actually wanted more than your asking price. Plus, rejecting a solid, full-price offer looks pretty bad. Doing so can mean your house is on the market longer. And data shows a direct correlation between a longer time on market and lower sale prices.
At the same time, remember that just because you reach a certain asking price does not mean you’ve maximized your home sale. There can be a lot of ways to make and save money in the negotiation process. So, keep that in mind when you’re working on strategies for pricing your home correctly, too.
If you have questions about asking price, market price, or anything else related to the process of pricing your home correctly, feel free to contact us for a free consultation.