Report # 4 - Price your home Carefully!
Getting the price right is critical to a successful sale. Price your home too low, and it may sell quickly, but you could end up without enough money to facilitate a move or new home purchase easily. You might end up feeling dissatisfied or even ripped-off. Price it too high, and you could sit on the property for months. Here are some common misconceptions about pricing.
Current price is determined primarily by the original purchase price. The fact is, markets change. Your home could be worth a lot more, or a lot less, than when it was new.
All improvements add to the overall value of the home . . . Wrong! Many homes are over improved for their size or neighborhood. Some improvements add value, such as the addition of a garage or extra rooms in the basement. But others are a matter of taste and style. Don't expect your favorite improvements to mean anything at all to your prospective buyer.
What would it cost to replace? Replacement value is not a valid measure of existing property value. Period. Just like a used car isn't worth the same as a new one, no matter how well-maintained.
Overpricing could cost you far more than you ever hoped to gain. Here's why:
- You may end up selling at LESS than market value. This
may surprise you, but if your home is overpriced, buyers
in that price range will probably select larger homes
in favor of yours. At the same time, your best prospects
may never see it because it's out of their range. The
house will remain on the market longer, adding to your
carrying costs, and ultimately, you may have to cut the
price below market value to move the property.
- You may lose your opportunity to make a good first impression.
A new listing creates excitement in the market. REALTORS®
working with buyers who are waiting for something new
to become available bring their prospects. Your home will
get the most activity and you're likely to see the highest
and best offers during the first 30 days. If your price
is too high, you'll miss your opportunity and wear out
your welcome. Eventually your listing becomes "stale."
It gets a reputation in the real estate community that's
tough to overcome, even after you lower the price.
- You could lose negotiating leverage. If your home is
on the market too long, you may find yourself having to
justify the price to a wary buyer. You'll lose your financial
and mental edge and may find yourself accepting too low
an offer in the end.
- You may encounter appraisal problems. The lender has
to be able to justify the price the buyer will pay. If
the appraisal doesn't support your price, you could lose
the contract even after accepting the offer.
- The good news is, overpricing your home makes a valuable
contribution to the sale of other, more competitively
priced homes in your market. Buyers will see similar homes
at a lower price and suppose they're getting a great deal.
So perhaps there will be a reward waiting for you in heaven
for your selfless act of service.
- Get a Comparative Market Analysis (CMA), but don't stop there.
Okay. If you're not going to overprice or under price, how DO you come up with the right price? The answer starts with the Comparative Market Analysis or CMA. The CMA is a comparison of other properties in your area that have recently sold. You will be able to compare size, age, condition, amenities and other variables with your own home. You will also see the listing price and sale price. This information can be extremely valuable in pricing your own home. But it may not be enough.
Getting a broader market overview will give you additional helpful information when pricing. It's like stepping into a room versus peeking through a window. By finding out the total inventory of homes similar to yours and the average length of time these homes remain on the market, you'll be better able to price your home competitively. Once you've done your homework, you should have a good idea of the best price range for your home.
By the way . . . don't let a real estate agent price the home for you. Consider that you are ultimately responsible for the successful sale of your home. Welcome the insights outsiders can give you, but be informed enough to make your own decision.