Monday, September 17, 2007

Pricing Your Home to Sell

How is the asking price determined? There are many factors to consider when pricing your home. One is seller motivation. Do you have to sell quickly due to divorce, bankruptcy, pending foreclosure or other hardship? Are you looking to upgrade to a larger home for your growing family, or downsize to a smaller home now that children are grown and on their own? If you are in a hurry due to hardship, of course you will want to consider a relatively low asking price to motivate buyers. On the other hand, if there isn’t a sense of urgency to sell, then you will be able to ask more. Either way, you must do some research to determine a price range to work with.

Of course, as the seller, you want to achieve the top price, in a short amount of time, with little hassle. Don’t let yourself be taken advantage of; beware of one of the biggest traps most home sellers fall into. The average homeowner will visit several different real estate agents for advice on selling their home. The seller believes his most important question is “how much is my home worth?” The realtor quickly answers with a figure that sounds great! Whichever agent gives the highest amount must be the one who knows what he is doing and therefore the one who will get the best result. Right? So the seller lists with this agent. After a week or two, the agent tells them the market has changed and prices are falling. You must reduce your asking price to get people interested in looking at your house. This could continue until you’ve reduced your price and sold your home for less than it was really worth. Buyers also lack experience, but their agent knows to look for these listings; the ones where sellers desperately continue to reduce their asking price to get their home sold. So, who wins? The listing agent, of course! He gets paid a commission based on the selling price, while you, the seller, might see little or no profit. Don’t fall into this trap!

The asking price of your home will be based on the market value. There is no fixed price, like what you find in a supermarket or department store. Market value is driven by the laws of supply and demand. Simply put, if there are few buyers and many sellers, the market value of your home will be low. If there are many buyers and few sellers, the value increases. So, how does one know the market value of their home?

In the above scenario, ask yourself this question: How did the realtor come up with the asking price he quoted? If he answered quickly, chances are, he’s just “buying your listing.” Remember, he’s commission driven, so he’s telling you what you want to hear so you’ll allow him to list your home. A good realtor will take the time to do a CMA (Competitive Market Analysis) in order to come up with an intelligent answer to your question of how much your home is worth. The agent will take into consideration the features of your home, including number of bedrooms and bathrooms, square footage, brick or frame, the surrounding area, and other special features like built in swimming pool, sauna, updates and additions. Then he will check out homes sold in the last six months that match the criteria of your home and are located in your area. He will analyze the listed price, sold price and length of time it was on the market and homes currently on the market. This is the best way to determine the present market value of your home.

Some people choose to get an appraisal before seeing a real estate agent. This way, they have an opinion from someone who is not motivated by commission. The appraiser is paid when he produces his report, no matter what numbers he comes up with. You can also talk to others who have recently bought or sold their home. One person’s opinion isn’t enough, no matter how well they present it to you, because you aren’t sure of where or how they arrived at their asking price. When you do your research and gather the results of several different sources, you are then armed with the information you need to make an intelligent decision.

You spend a lot of time and effort sprucing up your home to impress buyers. You should also take the time to do the necessary research to determine your asking price. Remember, with most buyers, their first impression comes right from your listing. If it’s priced too high, chances are, they will not take the time to see the home.

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