When you’re selling your home, setting an asking price is the most crucial factor. Yes, making sure your home is clean, tidy, and well maintained are important factors too, but first you need to get potential buyers through the door. Set the price too high and you can wait for months or even years to sell; but too low and you can risk losing thousands of dollars. Get it just right, and you’re increasing your chances of selling in a shorter time.
Who Decides on the Asking Price?
The ultimate decision on asking price falls to the seller; it’s your home after all, so your decision to make. You may be advised by a real estate agent on an appropriate price point or range, but they cannot force you into marketing the home at a price that’s different to what you’re comfortable with.
Unfortunately this is where the problems arise. Even after being advised on a price, sellers can have unrealistic expectations. We all like to think that our home is worth more than our neighbor’s; that ours has more square footage, or more updates, a larger yard, or more curb appeal, but the chances are that the real estate agent knows what they’re talking about when they discuss a sensible asking price and marketing strategy.
Priced Too High
More often than not a home will be priced too high rather than too low, and there could be a number of reasons for this. In a declining market it’s best not to try to sell at all, but other factors may come into play – such as a new job in a different town. In this case the seller has to sell and wants to break even at least on what they paid for the home. However, a declining market actually dictates it’s now worth far less than they paid for it.
Another common reason why sellers price their homes too high is because they want to move to a different home that costs more. They want to move up the property ladder, but the only way to be able to afford their dream home or neighborhood is by selling at a higher price. Often sellers will try to set their asking price because they need to get x dollars out of it, not because it’s a realistic price.
A home priced too high will generally sit on the market for far longer than one that is not. A seller then has a couple of options – either wait and hope someone is willing to pay your inflated asking price, potentially never selling; or gradually drop the asking price. The problem with the latter is that many potential buyers will first be put off by the high price, and second put off by the fact that the price has dropped multiple times – they will wonder what is wrong with your home.
Priced Too Low
At the other end of the scale setting the asking pricing of your home too low can give you problems as well. On the one hand buyers may be happy to snap up your home at a bargain basement price and you can lose thousands of dollars, but this is if you sell at all.
If a home is clearly underpriced some buyers may be wary, wondering what is wrong with it that made you set the asking price so low. You could also find that if buyers are looking at houses with a minimum asking price that your home is below that threshold.
So How Do You Decide on the Asking Price?
Real estate agents are the first people you should talk to. They do not just pluck a number out of thin air and tell you what you want to hear, because, at the end of the day, the agent wants your home to sell too so they can get their commission. If a home is stuck on the market for a long time it’s costing them money to advertise it.
When you ask an agent to come and value your home any good agent will do plenty of research first. They will print out comparable properties that are listed for sale right now and those that have sold over the past few months in your neighborhood. This way they can compare your home to those – looking at square footage, updates, features etc. By adding on for certain updates, or taking off for things that clearly need doing, they can arrive at a realistic asking price.
But don’t just take the word of one agent if you’re still unsure. Free home valuations are offered by the majority of real estate agents out there, so ask several to come and view your home to get their opinion. You will probably find that they all tell you roughly the same asking price!
Once you’ve been told what that is, it’s tempting to raise the asking price by a few thousand so that you don’t lose as much as when you sell, after all, it’s only an asking price so you may get much lower offers anyway. But the key is, if you’re priced sensibly, buyers will appreciate that and generally will not make lowball offers. Setting your asking price at a realistic level, and being prepared to take offers at a little below the asking price, will get your home sold far quicker than one that’s over- or under-priced.