Being overpriced is a bad start
If
you're selling your house, one of the first steps you'll take is
setting an asking price, a maneuver that requires the ability to find
the perfect balance between attracting solid offers and ultimately
receiving top dollar.
If
you're working with a Realtor or other industry professional, you'll
probably hear talk of fair market value, which typically means the
highest value an educated buyer will pay. Fair market value is usually
not the asking price.
Many agents will begin by
conducting a competitive market analysis of your house and give you an
estimate of the fair market value of your home, which is a range that
will fluctuate depending on the housing market in your area and how
much similar homes in your neighborhood are selling for.
If you're in a hot seller's market, like many communities throughout California and much of the West, you'll have the advantage.
"The market has been gaining
steam, and the seller is taking control," said Nashat Benyamein, a
broker in Long Beach, Calif. "Our average number of days on the market
went from 30 days to 7 days or less."
While overpricing to some
degree can be beneficial, you'll still want to be careful and avoid
pricing your home too high, which almost always is nonproductive.
As you work with your agent
and set your price, you'll want to recognize the factors that may
prompt you to raise your asking price too much when it isn't warranted.
Some of those factors include:
- Upgrades have been added. While many home improvements will help
you recoup a good chunk of your investment, it won't give you 100
percent of what you paid. Also, the more personal the improvement—a
swimming pool, a sunroom, purple floors—the less likely it will be
viewed favorably by potential buyers.
- The need for money.
- You're moving to a higher-priced area.
- The original purchase price was too high.
- The seller lacks factual comparable sales to prove what the market value is.
- The seller wants bargaining room (listing more than 1-3 percent above market value actually reduces bargaining power).
- An unnecessary move, so you're not motivated.
On the other hand, if you're
in a neutral or buyer's market, like in Minneapolis, you'll really need
to be cautious in setting your price.
"While a few select
neighborhoods are experiencing good activity, the market generally is
favoring buyers," said Mary Jo Oren, a Realtor in Minneapolis, Minn.
"Price reductions are becoming more common and sellers are having a
tough time adjusting to fewer offers, fewer multiple offers and
increased market time to sell. Buyers are less emotional and not afraid
to offer significantly less than list price plus ask for additional
seller participation."
Generally, the asking
price—the price advertised when it goes on the market—is set slightly
higher than market value, usually 1 to 3 percent above market value.
You should assume that
negotiation will be necessary to reach an agreement with the buyer. If
you price your home too much above market value, you'll get fewer
showings and offers in which the potential buyer is fishing to
determine how low you'll go.
You'll want to establish
your priority list: Are you more concerned with selling quickly or
getting the most money possible? You'll also want to contemplate
whether you think the agent's suggested price is reasonable and whether
you'd pay that amount if you were a buyer.
Your agent, as well as
friends, relatives, and neighbors, will help you point out your house's
advantages and disadvantages that you may not have thought about
because you're too close to the house and not as objective as others.
A third party will help you
think of your house as a commodity—something with positive and negative
selling points. At that point you can decide on a price that you deem
competitive and in line what other houses in your area have sold for.
By Michele Dawson