If you know the real estate business, you already know competition is the name of the game. Embrace competition, if you are deciding to sell your home with an agent or as a for sale by owner. In the end, what selling a home is all about is the competition to sell as quickly and for the most money as possible. And if you don’t price a house right and position yourself correctly when you enter the market, rest assured that somebody else in your neighborhood will take advantage and leave you in the dust.
Price a house right
It may sound mundane, but with the power of the internet and the information it supplies, it’s extremely important to make sure you price your home accurately. These days, buyers are smarter and more well-informed than ever before. And if a buyer thinks a home is overpriced, they will most likely decide to look elsewhere.
Comparative Market Analysis
When you work with a real estate agent, they will provide you with a comparative market analysis (CMA) which is simply a compilation of the most recent sales in your area. A CMA will factor in things such as home details, days on market, and the final sale price.
Even if you are selling your home for sale by owner (FSBO), you can usually find a good estimate of your home’s value online. However, it’s ok to contact a few real estate agents and request a comparative market analysis (they are usually free). Be aware that you will be getting a lot of follow up calls from agents if you pursue this route. Additionally, it can sometimes make sense to hire a professional appraiser (which ranges from $300 – $1000) as they can provide you the true fair market value of your home.
If you do search for comps on your own, note that comparable properties should:
- Be within one mile of your home – You want homes to be close to the home you are pricing because of external factors like proximity to stores, parks, schools, etc.
- Have sold within the last 3 months – The market is always fluctuating, so it’s better to compare your home that sold within a close time range to when you are pricing to mitigate the risk of not pricing your home accurately.
- Similar age as your property – Homes change in style and quality over time, so ensuring the home you are pricing is similar in age to comparables is important.
- Similar square footage – You want the square footage to be very close to the house you are trying to sell. Preferable within 10% of your home. Homes usually increase in value as size increases so it’s important to compare homes that are similar in size to the one you are pricing.
Strategic price points
Once you have a comparative market analysis, consider using strategic selling price points when developing your pricing strategy. For example, the major real estate search platforms (Zillow, Realtor.com, Redfin and Trelora) all have filters that can be applied when a potential buyer is searching to buy a home. One of these filters is a price range feature that allows the buyers to sort all homes for sale on the market by a specific price range, which typically is in $50,000 increments.
Pricing a home at an incremental price of $50,000 will ensure that you show up at various price points within the filter, thereby getting in front of more potential buyers.. This strategy wouldn’t always make sense but is one example of a pricing strategy that a real estate professional might implement.
For example, it would be better to list your property at $400,000 rather than $390,000. That way if one buyer is searching for a home in a range of $350,000 – $400,000, your home will show up. Likewise, if another buyer is searching for a home within a range of $400,000 – $450,000, you would also show up in that search as well.
What is value range marketing?
Another pricing technique that can lead to more showings and higher offers is something called “value range marketing”. Value range marketing is a form of pricing in which a seller chooses an ideal listing price (let’s say $500,000).
From there, you then choose a lower price (a price that you wouldn’t turn away if it was offered to you, let’s say $450,000). That gives you a starting point to work with in which you would consider listing the home in a range between $450,000 and $500,000. Not at $500,000.
The price is right when sellers accurately list extremely close to where their house is truly valued. When this happens, buyers have that information at their fingertips to figure out the price is fair. And because it’s fair, the buyer must make a strong offer to ensure they win the house. Sellers, with the right price, spend less time on the market and increase their chances for multiple offers and more money.
Unfortunately, when sellers stretch the price too high to build in some “negotiating room,” they often sit on the market for weeks. And they end up selling for less than they could have had they just priced their home correctly in the first place.
What factors affect prices of homes for the current housing market?
- Seasonality – In most of the United States, spring and summer are considered to be the best time to sell a home. Usually, the weather is nicer and families want to make their moves while their kids are out for summer break. Fall is the second-best time period to sell a home and then winter is the slowest season. Winter is the worst season to sell because people are busy with the holiday season and the weather is often way worse than spring months.
- Inventory – How many homes on the market is a strong indicator of how fast your home will sell and for how much. The more homes that are on the market, the less likely it is to sell for a price that you want. This is because supply outweighs demand.
- Buyer’s market – If it’s a buyers market and supply outweighs the demand, you’ll need to price slightly lower than other homes on the market since there are more homes for sale than there are buyers.
- Seller’s market – When it’s a sellers market, then demand outweighs the supply of homes, so you can price your home slightly higher since there are more buyers competing for less homes.
- Neutral market – A neutral real estate market means that supply and demand have reached an equilibrium where there are an equal number of buyers and an equal number of sellers. This means that a final sale price will most likely match what the market is indicating.
Another way to price your home correctly
As with anything in life, there’s not just one secret to making things click. Pricing correctly certainly isn’t the only thing necessary to sell a house. But it is the single most important thing you can do when getting ready to sell. So do yourself a favor and make sure you price a house right.
If you’re looking for agents with more experience than 99% of other real estate agents in the country and with intimate knowledge of the neighborhoods you’re searching, consider Trelora. Additionally, Trelora gives you a screaming deal – we split our buyer’s agent commission, up to $6,000, with you when you buy a house with us. Finally, Trelora’s proprietary technology makes online home searching a snap and allows you to coordinate communication with your Trelora agent quickly and efficiently.