Determining the Best Asking Price
A realistic asking price will help to sell your home quickly and for top dollar. By properly pricing your home you ensure that the gap between the asking and selling price is small and that there will be a greater likelihood of competing offers. Your home will also maintain its 'marketability' for a longer period of time before people start to say... "That home has been for sale forever. What's wrong with it?"
A house that is priced 10% over its actual market value is many times less likely to sell in the initial 30 days of marketing than one priced within 5% of its true value. Not only will an over-priced home take longer to sell, it is also likely to sell for less than it's actual value. This is due to the "discount" often associated with properties that have been on the market for a longer than average time.
It should be pointed out that recommended listing prices are based on historical sales and current market conditions. It is always difficult to walk the fine line between getting the most for a property while at the same time ensuring your asking price is competitive enough to attract serious offers.
How you feel about testing the market will determine how much higher than the current selling prices of similar properties you'll wish to ask for your home. You can always start at a higher price than the market is currently bearing and then, if necessary, reduce your price at a future date. The drawback to this is that it could take longer than normal to sell and you could end up helping to sell other similar homes as they may look comparably less expensive than yours.
This is where the experience and knowledge of a good REALTOR® is invaluable. REALTORS® spend a lot of time and energy making sure they know their local market inside and out. They keep their finger on the pulse of the market and have the resources, connections and ability to keep you up-to-date with its constant changes. They know all of the properties currently for sale in your area and are literally your best resource for determining and getting the highest price possible.
The Main Factors that Affect Market Value are...Location:
- availability of community amenities, such as public transportation, parks, stores, churches and schools
- quality and consistency of neighborhood planning
- future development plans and local zoning
Condition of the Home:
- style, layout, size, age and quality of construction of the building
- size, shape, privacy and landscaping of the yard
- first appearances
- floor layout
- quality and appearance of fixtures
- general overall condition of main systems (roof, furnace, electrical system, central air, etc.)
Market Conditions and the Economy:
- the asking and selling prices of comparable neighboring homes
- The best way of establishing a range of value for a property is to have your REALTOR® prepare a general market analysis of the neighborhood you are interested in. This will give you a good overview of the current market and will show what comparable properties have been selling for recently.
- number of homes currently on the market
- number of people looking to buy the state of the local and national economy
- current mortgage rates
No matter the condition or desirability of a property, its value will be affected by current market conditions. Here are the various conditions you may encounter and how they will affect you: '
- Balanced Market: The number of homes on the market is equal to the number of buyers (supply equals demand). In this market, prices are stable and homes sell within a reasonable period of time. It is a calm atmosphere with Buyers having a satisfactory number of homes from which to choose.
- Seller's Market: The number of Buyers exceeds the number of homes on the market (demand greater than supply). In this market prices are increasing and homes tend to sell quickly. As a Buyer you will probably have less negotiating room and may experience competing offers when trying to purchase your home.
- Buyer's Market: The supply of homes exceeds the number of Buyers (supply greater than demand). In this scenario prices tend to drop and the properties stay on the market longer. As a Buyer you will have more selection and less competition and thus be better able to negotiate a good deal.
When you understand current market conditions, you are better able to position yourself as a Buyer. It helps to know if you are in a Seller's, Buyer's or balanced market when deciding what price to offer. In a Seller's market, there is little selection and you may have to make a full-price (or even higher) offer if the home is properly priced in order beat the competition. In a Buyer's market, you have a lot more selection and plenty of room to negotiate. In a balanced market you will find a good selection of homes for sale and have a reasonable amount of time to decide on a home and negotiate the price.