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How To Price Your Home Like a Champ
Dated: September 9 2020
Here’s a little secret: the most important decision you’ll make when selling your home is the price you’ll ask for it.
Handsome, clever, well-spoken real estate agents will do their best to convince you of the importance of their unique marketing strategies - and it won’t all be hot air: marketing is critical to getting the best price for your home. However, setting a list price is part of marketing your home, the critical part, the part that will make the biggest difference in the end. So when you’re choosing an agent, don’t jump for the one that suggests the highest list price, not unless they have the stats to back it up.
For that matter, an agent shouldn’t be telling you what price to ask for your house. They should be providing you with the information and guidance you need to choose your own price, confident that this will achieve a quick, easy, profitable sale.
So what pricing strategies should you be discussing with your agent? It depends, dear reader, it depends like crazy.
Pricing Strategy 1: Below Market Value
The goal of this strategy is to spike interest in the listing, resulting in lots of showings and - ideally - multiple offers. Hopefully you’ll end up with at least one, quite possibly several offers over market value.
This strategy works best in a hot Sellers’ Market with low inventory. If the market is hot enough Buyers will be willing to bid on homes that need some work or aren’t in their favourite location, especially if they’ve found themselves priced out so far or have already lost a few multiple offer competitions. This strategy also works better with entry level homes than luxury properties, as there will almost always be more demand in that sector.
Pricing below market value is risky - even in a hot market. You might not get any offers, and even if you do, even if you get multiple offers over asking, they might still be lower than you would have achieved if you’d just listed at market price.
Although I’ve said that pricing below market value works best in a hot market, it also has its place in a cooling market. If home prices are dropping, pricing below current market value can get your home sold quickly, before market value drops. You want to be ahead of a cooling market, not behind.
Pricing Strategy 2: Market Value
This is the most common strategy, and will serve most sellers well in most markets, but it does take some expertise, because finding “market value” before a home is sold is as much an art as it is a science. This is where working with your agent pays off, assuming they have considered:
- your home’s location and condition
- comparable homes on the market
- comparable sales from the past three months
- comparable listings that didn’t sell
- the current state of the market - days on market, inventory levels, price trends
These are the basic metrics that make up a Comparative Market Analysis, which any good agent should be eager to provide to you.
Pricing at market value means you shouldn’t need to rely on multiple offers to drive the price up - you can expect to receive offers close to your list price. Even if people offer below asking (a common enough strategy as Buyers test your resolve) a seller should be able to hold firm to their asking price, at least when the home is new to the market. And if you don’t receive any offers near asking you clearly haven’t priced your home at market value!
Pricing Strategy 3: Above Market Value
I almost hesitate to call this a “strategy,” but I need three options to make a list, so let’s go with it.
You do see houses priced above market value all the time. There are lots of reasons a home may be priced too high: sometimes sellers need to clear a certain amount to meet their financial obligations, sometimes they expect they’ll have to negotiate down to get their final price, sometimes they just love their house so much they can’t accept its market value.
Whatever the reasoning, it’s a crap idea, and here’s why.
1.You’re shrinking your potential market
Almost everybody finds their home on the internet now, and the way most people find their home on the internet is through an automatic listing portal set up by their agent. The budget for this search will have a top end, usually just below a multiple of $50,000. For instance, people will be searching for a property priced $749,000 or less. If your home has a market value of $749,000, but you price it at $764,000, few of those people with a cutoff of $749,000 will even see your listing.
2. Buyers don’t like to negotiate
Of course this is a generalization, but most people don’t want to put in a low offer. They’re afraid they’ll insult the sellers, and they don’t want to negotiate. Now, granted, most buyers will have an agent to do the negotiating for them but even then, it’s the buyer who initiates the offer, and if they think your house is priced out of their range they often won’t even book a showing. Market value leads to showings, showings lead to offers, offers lead to sales
3.Listings get old…fast
This is another side effect of the way most buyers find properties now. They get your listing in their Inbox - or they don’t. If they don’t get the listing, they don’t book a showing. No showings, no offers, remember? Now say your house is on market for a month, unsold. Your agent has had their favourite conversation with you, the Price Reduction Conversation, and you drop the price to what would have been market value a few weeks ago. Now all those folks who didn’t see your listing see it - and they also see it’s been on the market for a month. Their first question - “What’s wrong with it?” Their second question - “I wonder if they’re willing to make a deal?” And you know what? You probably should be willing to make a deal, because the longer your home stays on the market the less leverage you have. And even though you can always re-list at a lower price, there’s no hiding the listing history from the buyer agent.
Are you thinking about selling your home but don't know how to price it? Perhaps a handsome, clever, well-spoken real estate agent could help...
Or, if you can't find someone like that, I'd be glad to lend a hand!
Price it right - get it sold.
A Victoria resident for over 20 years, I grew up in Halifax and studied at Dalhousie University, Concordia, and the National Theatre School. Several years in the music industry then led to an extended....
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I once showed my own listing to a potential buyer who took delight in pointing out what he saw as the property’s innumerable deficiencies. I’m a pretty open-minded fella and I've learned