Pricing a house in a way that will encourage a timely sale is quite challenging for home sellers and often for Realtors.
House pricing isn’t rocket science, yet so many get it wrong. Numerous studies indicate that the longer a home remains on the market, the less money it will fetch when it sells.
Finding yourself with a home that won’t sell because you priced it too high is the last thing you want to happen, which is why it is so important to price it correctly at the start.
Pricing a home correctly is vital in selling it quickly for the most money possible.
Understanding how to price a house accurately is critical for homeowners to have the most success.
Buyers Have All The Information on House Pricing
Remember, buyers have access to a lot of information about your home. With this information in hand, it is unlikely they will be taken in by a price above market value.
They will also be able to see how long the home has remained on the market, and they may be prone to avoid the home the longer it remains unsold.
The days of information only being available to real estate agents are long gone. Home buyers today are armed to the tooth with information.
An educated home buyer understands when they see a good deal as much as an unrealistic seller who has pipe dreams about what their property is worth.
Many sellers, unfortunately, are still under the impression that pricing a home higher leads to a higher sale price. Sorry guys, but this is NOT the case! Study after study indicates that homes priced correctly from day one get more money than those that have to reduce their price.
An excellent real estate agent understands a seller’s dilemma of not wanting to leave money on the table. This is why it is crucial to understand the factors to consider when pricing a house for sale right from day one.
Use these data points wisely, and you can price your home where it should be without worrying it could have fetched thousands more.
There are many things to know about pricing a home to sell. We will cover all of them.
Below are six considerations when pricing a house you should be familiar with.
Factors To Look At When Pricing a House
Let’s look at what you need to know on how to price a house for sale. It’s how Realtors determine how to price a home.
1. The Current Real Estate Market Conditions
What is the condition of the local real estate market? Is it currently a buyer’s or seller’s market or somewhere between?
If you are considering selling your home, you have probably been paying some attention to the real estate market in your area. Generally speaking, market conditions will play a role in pricing a house.
Are the prices of homes going up or down? Whichever way prices are headed, you will want to plan accordingly.
If you happen to be selling during a slowdown, you will need to price more competitively if you want to move the house. A buyer’s market means fewer buyers competing for your home.
You could always wait it out for things to improve, but if they don’t improve, you are left pricing your home even lower than you would have at the outset.
Conversely, house pricing could be headed upwards if it’s a seller’s market. You probably don’t want to leave money on the table.
Fortunately, when real estate markets favor sellers, the likelihood of a bidding war increases when pricing a house slightly under the market value.
2. Comparative Sold Properties Are The Most Vital Factor For Pricing a House
How to Price a HomeThe most essential factor to establishing pricing a house is the comparable sales or what real estate agents call “comps.”
Looking at recently sold properties in your area similar to yours is one of the primary ways to price a home.
This is the number one means of how a real estate agent figures out market value. The search area you choose will usually be based on the population density of your area.
If your home is in a densely populated city, you may only search within a mile of your home’s location for recently sold homes.
If you live in the countryside, you may have to search for a radius of several miles.
Make no mistake about it; what similar homes are selling for in your area is the most crucial factor in determining the market value of any property.
3. The Under Agreement Dates of Sold Properties Factor Into Pricing a House
A home’s selling price is much more relevant to your sales situation if the market was similar at the time it was sold.
This is a pricing factor that is often overlooked by both homeowners and real estate agents alike. You need to look at the date the offer was made on the comparable properties and determine if that sale occurred in a similar market or if there were differences.
If the market was more competitive at the time the similar home sold as it is now, you might not be able to price as high and still get a good response.
For example, if the house sold in the spring and you’re now trying to sell at the summer’s end, the market activity could be much different.
On the other hand, if the market was more competitive, with numerous similar homes for sale, you may be able to ask for more money now.
This is particularly true in real estate markets where inventory is meager. Understanding the difference in markets during different periods is one area where having a Realtor who knows the local market inside and out helps.
4. Homes Under Agreement Can Assist With Home Pricing
Homes currently under contract are essential when pricing a home for sale because it gives you a snapshot of what is How to Accurately Price a Homeoccurring in the market.
The only problem with looking at inventory under contract is we don’t know what the property sold for until it closes.
It is against the code of ethics for a Realtor to reveal the sale price of a home without the seller’s express permission to do so.
You can, however, make an educated guess based on how quickly the house went under contract.
If it went very fast, the chances are greater that the home is under contract for close to, if not the asking price.
If it is a seller’s market, there could be a strong chance the property sold over the asking price.
Pending sales should never be overlooked when pricing a house for sale.
It is essential to point out that pending vs. contingent is different. There is a greater chance the sale could fall through when it is contingent.
5. Current Inventory Factors In Pricing a Home For Sale
You want to look at the current home inventory in your area to get a feel for how competitive the market is at the moment.
If there is a massive glut of houses right now that are similar to yours, you are in a competitive market and will need to price more aggressively to stand out.
If fewer homes are available for sale, you may be able to price a little higher because so many people are looking to buy. Remember, you want your home to stand out from the other available homes.
Comparative Houses For Sale is The Least Essential Factor in Pricing
Comparative active properties are the least important factor in pricing a house to sell. You certainly want to analyze all the properties you’re competing against, but no more.
The homes currently for sale have already gone through the same process you are going through, and the prices they sit at can give you an idea of how to price yours competitively.
Many owners are tempted to price just a little higher than the competition, imagining that their homes are unique and will fetch a higher price.
Most often, this is not the case. Pricing higher than comparable homes usually leads to the house sitting and not selling, which leads to the home becoming less valuable in the eyes of the buying public.
Your Neighbor’s House Price Means Little
It cannot be emphasized enough that what other homeowners think their home is worth is the least important factor in determining the market value of YOUR home.
In other words, you don’t want to hang your hat on your neighbor’s inflated view of their property. Doing so can stop a sale.
Additionally, the price of your neighbor’s home can drop at a moment’s notice. If you craft your pricing based on your neighbors, where will that leave you once they reduce the price? You are correct if you think you will need to adjust as well.
The problem is you already made a considerable mistake basing your price on something that has not sold. Market value is always determined by what has SOLD, not what’s for sale.
The price of a home currently listed for sale is the least important factor in establishing market value.
A homeowner looking at what their neighbor’s property is listed at is often a reason given for pricing a home in a particular manner. This is one of many lame reasons sellers give for overpricing their homes. Don’t be one of them!