The Importance of Proper Pricing
There are four primary elements in marketing a home: location; condition, competition and pricing. Striking the right balance between these elements is the key to achieving a successful sale.
Proper pricing is part of the marketing plan.
The good news is that pricing is an element of the marketing strategy that is within your control, unlike your home’s location and the competition. When you establish the right price, you create the tool that will attract the attention of home buyers and Realtors.
If you price your home too high, you run the risk of reducing the final sales value of your home because you will not capture motivated buyers and their offers. Statistics consistently demonstrate that homes that sit on the market longer, sell for less.
Who determines the proper price?
Sellers? Realtors? Actually, neither! It is the buyer who determines the proper price for your home.
A listing price is a seller’s first offer to the marketplace that allows buyers to make a counter-offer based upon what they perceive to be the real value of a home. Real estate is like any other commodity, and there are many factors that influence the perceived value of a commodity, including competing options in the marketplace.
If there are a lot of homes for sale in your price range and community with similar features, buyers have enough information to make a decision about your home’s value. This decision is based upon fact and influenced by the knowledge that their purchase options are plentiful. In comparison, most sellers tend to make emotional decisions about the price of their home.
Think like a buyer when pricing your home.
So how do you move from an emotional perspective to realistic outlook about the value of your home?
The Realtor who you select to market your home will prepare a comprehensive, written comparative market analysis. This is very important information to review, but you can take the pre-market analysis process further to gain the perspective of a buyer.
First, ask your Realtor to take you to two or three homes that are currently on the market. These homes are ACTIVE listings.
Your home will be competing with the ACTIVE listings on the key elements of marketing including location, condition/features and price. Don’t just follow your competition. Any of these homes could be improperly priced. You want to lead the ACTIVE market with a compelling price and a home that sparkles with appeal from the curb to the back door.
The next step is even more important. Ask your Realtor to review with you a few of the homes that have SOLD in the last six months. SOLD listings provide the most accurate benchmark to measure your home against because the balance of price, condition and location got the job done. A buyer was willing to not just make an offer, but close on that offer. The average price per-square-foot of these SOLD listings is the most accurate target for you to aim for when pricing your home.
Finally, ask your Realtor to review with you a few EXPIRED listings. These are homes that were listed, but never sold. The seller never got an acceptable purchase and gave up. Improper pricing is usually the reason an acceptable offer was not received. The seller had unrealistic expectations and the wrong perception about the market value of his or her home to buyers.
By analyzing ACTIVE, SOLD and EXPIRED listings, you gain a better understanding of a buyer’s perspective. This perspective will help you achieve the highest price the market will bear for your home in the shortest time possible.
Then you get to move from being a seller to a buyer and enjoy the process of shopping for your next home.