Pricing your home for sale

Pricing your home for sale is the most important part of marketing your home. It is the #1 marketing tool for getting your home sold. If you are selling your home purge yourself of the following thoughts;

-         How much money do I want to make?

-         How much money I need?

-         What I deserve to earn?

Your desires and needs have nothing to do with marketing and since pricing is a critical component of marketing the sooner you change your orientation the better. Besides, you don't get to determine the value of your home. And neither does your listing agent. The market place will determine the value of your home.

The market value of your home (the amount your home should sell for) is determined by three main forces. They are:

• The supply and demand of homes that are on the market.
• The motivation of the buyer and the seller.
• The sales history of comparable homes

1. The sales price of comparable homes.

This is the number one item that people look at. How does my home compare to other comparable homes that have recently sold? Besides looking at the comparable sales a realtor can also let you know how long it is taking to sell the home and how much are they discounting the list price. These other figures will give you a realistic assessment of the market place. And it will better prepare you for the time it may take to sell your home and how much the buyer may be looking to negotiate.

 The more homogeneous the homes in the neighborhood the easier they are to price. Condos are typically easier to price because they are too similar and hard to overprice. In older neighborhoods this is more difficult because of updating and additions to homes. The quality of the homes can vary a great deal in older areas and this can have a huge impact on value and price. If you live in an older area you must be objective about how your home compares to other homes that have sold. If you draw the wrong conclusions you will not price your home correctly and you will have to bear the consequences.

               2. The supply and demand of homes that are on the market.

If you are selling a home and then five of your neighbors also list their homes you know your value just dropped. Simple supply and demand economics tells you the more homes you have to compete with the worse off you will be. To effectively compete you must be aware of the other homes that are on the market place. They are your competition. If the competition is priced better or if there are too many homes on the market then the value of yours will be driven downwards.

Before you make any pricing decision you have to make a competitive analysis to see how your home competes with others that are on the market. And while your home is on the market you have to continue to analyze the market and react appropriately to changing conditions.

                3.      The motivation of the buyer and the seller.

This does impact the final value of the home but how does this impact your pricing? You don't even know who the buyer is yet. But you do know your motivation. Be realistic about your own motivation before you begin. If you are highly motivated to sell the home then be even more realistic about the price. Then price it lower to sell. And if you aren't motivated then the opposite may be true.

 PRICING STRATEGIES

 Each home has a maximum potential value (the price your home should sell for) that is determined by the market place. Understand that the list price is a marketing decision that has clear risk and benefits. Here is a simple outline or guide you can follow when deciding on how to price your home.

The first step is to work with your Realtor to determine what the most likely market value of the home is. What will the market pay for your home? This will involve a detailed and realistic assessment of the market and how your home honestly stacks up. This isn't the listing price but the likely value or sales price that will be determined by the market. You have to look at two main factors:

1. The comparable sales.
2. The market or the supply and demand of homes that you are competing with. If there are too many homes for sale and it is a buyer's market that will dampen your price. And you have to know how your home compares with the competition.

 Now that you have a market value in mind you need to set the price. The list price is a marketing decision and has clear risks and benefits.

 1. Setting a listing price below the market value. The benefit is you will have a very competitive price and likely will sell it quicker and not have to offer further discounts. The negative is you may be leaving money on the table and could have sold it for more. If you are motivated to have a quicker sale and want to minimize making monthly payments on the home then this may be an appropriate strategy. It may also make sense in a buyer's market because it will make your home more competitive. The further below market value you go the more these pros and cons become true.

 2. Pricing it at market value. This is a safer bet and you are likely adding just a little for negotiations. (Your real estate agent can tell you the typical discount from list price to sales price in your market). You aren't trying to be too greedy by listing it too high and are still trying to be somewhat competitive. This is the middle ground approach.

3. Pricing it higher then market value. The benefit is you would earn more money. The risk is you have overpriced your house. It can take longer to sell which means more mortgage payments and more expenses.  When a house comes on the market there is an initial surge of buyers who take a look. If a home is overpriced you risk loosing the benefits of the surge. If you then have to lower the price the market may start perceiving you as being more desperate and start driving your price down even further. The higher you list above the market value the more you risk having to eventually discount the house below the market value.

 At Revealty we are unlike other real estate firms. We won't tell you at what price to list your home. We will tell work with you to determine the likely market value. And we will work with you to show you the pros and cons of different pricing strategies. But ultimately it is up to the Seller to determine what risk they are willing to take when listing their house. It is up to us to reveal to you what those risks are. The most important thing to keep in mind is pricing or list price is a strategy and marketing decision.