Selling a home is always an emotional transaction. It makes setting a reasonable price for your listing all the more difficult, especially for first-time sellers. Many fall prey to the common misconception that pricing your home the highest also translates to a higher selling price. In reality, that’s not necessarily true. On the flip side, underpricing might hint that your home has some underlying issues that might scare off potential buyers.
Here are some essential things to consider when trying to ascertain a good listing price for your own home:
1. Make a Note of Similar Listings
A Comparative Market Analysis (CMA) is the most accurate way of estimating the value of your property in an urban setting. Ask your agent to help you prepare a CMA by comparing similar listings in a well-defined area over a 3-6 month duration.
The area in question will largely depend on the location of your property. For example, if your home is located in a densely populated Missouri township, the search radius can be a mile. On the other hand, it would be several times larger in a more suburban and rural setting.
Here are some more details that you will need to consider while compiling similar listings:
Property prices can be affected by seemingly unimpactful factors like rail tracks, bridges, and dividing lines like streets. For example, let’s consider two similar properties near the train tracks while the other near a park. The loud noises from the passing trains will severely impede the perceived desirability of the first property, and the two will vary widely in their valuation.
The age of the property matters. For example, if a home was built in 2010 and you’re comparing it with another similar property built in 1980, they will differ significantly in their market value. The reasons are simple – the older the property, the more the decay and damages, and the higher the maintenance costs. Consequently, their listing prices will be lower than newer ones.
Make sure that you are comparing properties within a set range of square footage. Ideally, this range should be within a 5-10 percent variance compared with the square footage of the property you want to list.
The homes you compare should also have a similar number and properties like bathrooms, bedrooms, and garages.
2. Ask for a Formal Appraisal
If your property is located in a rural setting, the CMA reports might indicate flawed valuations because of a lack of sample size within a reasonable area. The search radius can be increased, but that creates too many variables to make a reasonable estimate. In such cases, a formal appraisal might reflect a more accurate valuation of your property.
3. Compare Sold Listings
Sold listings are a great way to estimate the value of homes in your area. Make a list of the recently sold homes in your area and determine the ratio of the price differences between the original listing and the selling price to the final listing and the selling price.
Apart from this, you should also make a note of the market conditions of the sold properties. For example, if the market is more competitive now than it was the day a similar property was sold, you might be able to get away with pricing your home higher. It is especially the case when the demand for inventory is higher than the number of properties on sale, and such a market condition is known as a seller’s market.
4. Make a Mental Note of Additional Closing Costs
Although most closing costs are paid for by the buyer, some like the agents’ commission fees and the buyer’s title insurance fees are paid by the seller. However, you might find yourself negotiating additional closing costs with the buyer if the other party runs into financial issues. So, you should keep some wiggle room for the same while pricing your home.
5. The Concept of Fulcrum Pricing
In real estate, demand is not restricted to a single price range. Instead, the demand depends on the median income of the area in question and the number of properties in a specific price range. As you move above and below that price range, the demand falls.
You exploit this by pricing your property at the fulcrum of the price range that is in demand. For example, suppose you price your property at $350,000 (considering most listings in your area are within the $300k – $400k range). In that case, you’ll find interested buyers from both the immediate lower as well as the immediate higher price bracket. It is a great way to broaden your potential buyer pool.
6. Visit the Active Listings
When pricing your home, you must put yourself in the shoes of the buyer to understand their thought process and expectations from your property during the negotiation process.
A great way to do this is by visiting the active-listed properties in your area and note what you, as a buyer, would expect from that listing. Once you’ve done that, you can adjust the price of your own home during the negotiation phase to reflect those buyer expectations.
Apart from getting an idea about the buyer’s perspective, this venture will also provide you with insight into your competition and what makes your property different from theirs. You can then factor that into your price adjustments to make your listing stand out in the market.
7. Stay Ahead of The Curve
Sometimes the real-estate market is simply unfavorable for sellers. It can be due to an economic recession or when the number of properties going up on sale outweighs the number of potential buyers in the market.
It is called a buyer’s market, and when this happens, your real estate agent must identify the new market trends and make adjustments to your pricing by predicting the demand. It will ensure that you stay ahead of your competition and make your listing highly attractive for buyers.
A Quick Sale Demands Accurate Pricing
While overpricing can scare off buyers in the first place, underpricing can also sow doubts in the minds of buyers regarding potential flaws in the property and, thus, drag on the negotiation process for long durations of time.
Pricing your home requires exhaustive market analysis and research to ensure that your listing does not only reflect the accurate valuation of your property but also makes your listing more competitive in the market, ensuring a quicker sale.
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