Price Your Home Right!
There are all kinds of strategies you can use when it comes to pricing your home for sale. Some turn to psychology, some gamble on going high or low, some hold off on taking offers to create demand.
But the simple truth is that setting the price at a fair market value is the best way to encourage a timely sale for an amount you deserve.
So, why is that and how do you do it?
In the red-hot market we were seeing through the early part of the year, there would be instances of setting a low asking price to trigger a bidding war or setting a high price, either because the seller had an exaggerated sense of the home’s value that the agent wasn’t able to temper or because there was the belief that there would be enough demand to justify the price.
The problem with both of these strategies is that there are potential drawbacks. In setting your asking price too low, there is the risk that it will not trigger bidding wars – an increasing possibility in a market that is cooling off.
And the strategy is not fair to buyers, who can become disillusioned when they think they can afford a home that they really cannot; after all, a seller is not going to accept an offer substantially lower than what he/she feels the home is worth. Affordability is a situation that will only increase as mortgage rule changes come into effect in January that will lower the amount a buyer can qualify for.
And setting your price too high, which is sometimes done because a seller feels they have “time” to wait for a sale or to leave lots of negotiating room, can backfire as well. Many Canadians shy away from negotiating. And while in a market of greatly appreciating values this strategy might work, when values are stable or declining, your home will just sit.
Besides, having your home sit for months is no fun. You’re forced to keep it “show ready” for an extended period, which is an inconvenience, and the longer your home sits, the more a potential buyer will start to wonder what’s wrong with it.
Setting a fair market price is the best way to ensure you get the value you should for your home, without a buyer feeling they’ve overpaid. It’s also the best way to create a buzz about your listing when it first comes out. The first few weeks of a listing are the greatest time for exposure to all buyers, and pricing it right will give you the best chance at a good outcome.
So, how to determine a fair price?
There are two key areas to evaluate when it comes to recommending the right asking price. The first is a market analysis. That includes researching recent relevant sales in your area, comparing against other properties on the market and assessing the current market conditions.
The other key is impartially evaluating your home. You are naturally attached to your home and likely attribute more value to it than a buyer would. It’s our job to assess the pluses and minuses to determine an accurate value. Are there recent renovations that have updated your home, like a new kitchen? Are there repairs that will soon be needed, like a new roof. What “features” does your home have that help it to stand out, like central air conditioning, triple-pane windows or hardwood flooring?
It’s important to remember that pricing is a bit of a moving target that will depend on a few factors, such as the time of year, how much competition there is, who your target buyer is and what else is happening in the market.
A few other points to keep in mind:
1. Pricing at the lower end of your home’s value range could stimulate more than one buyer and create a herd mentality. And if you’re looking for a quick sale, this is one way to encourage it.
2. It helps to price your home within expected search ranges. Many buyers start their home search online. If they’re looking at homes priced from $400,000 to $500,000 and yours is listed at $399,000, it won’t be seen. While an agent would typically widen the search slightly to work in some wiggle room, why not give yourself as much exposure as possible?
3. Don’t try to get too creative with the price. A home listed at $477,777 because the seller thinks it’s unusual and 7's are lucky is just calling attention to itself for no real reason. And that will make a buyer wonder about the seller, which starts to personalize the home. And personalizing a home makes it more difficult for the buyer to see themselves in it.
4. It’s a good idea to have a contingency plan if the original listing price is not working. By having a backup, there’s already a plan in place if a shift needs to be made.