How to Avoid Overpricing Your Home
It’s not always the condition of a house that will stop it from selling. If the listing price is inflated, most buyers will quickly decide to look elsewhere. You might think that buyers will just place an offer and plan to enter into back and forth negotiation with you, but that is not what usually occurs.
The fact is, the number one reason a house doesn’t sell in a healthy real estate market is that it is priced too high. How can you avoid this? Does it mean you have to price your home conservatively? Not at all. It just means you need to choose the right real estate agent to represent you and offer you educated recommendations based on facts.
The best real estate agent will have experience and knowledge of the current market conditions in your area and also do a complete and thorough Comparative Market Analysis (CMA) on your home.
What is a CMA?
A CMA is usually a free service provided by your real estate agent that gives you an accurate, fact-based, market value for your home. In other words, based upon what homes like yours are selling for today, a reasonable asking price is determined.
In a CMA your agent usually will compare and contrast three to five recently sold homes that possess the same characteristics (as much as is possible) as your home. Features they look at include the same number of bedrooms, baths, square footage, etc.
If there are some differences between the selected properties and your home, there will be a method that uses cost data to adjust the sold price. In other words, your agent will determine how much to add or subtract if the properties they are using for comparison have a different number of bedrooms or baths than your home.
Your agent will then derive a listing price range for your home and make a recommendation at what listing price they feel it will do best.
What about the bidding wars you hear about?
It is not uncommon right now for there to be multiple offers coming in from several potential buyers. But in general, this occurs with homes that are priced correctly or even slightly below market value by a small percentage (3% - 4%).
It sounds counter intuitive, but pricing your house slightly below its value typically brings in tons of potential buyers – all vying for you to accept their offer. This creates competition and the perfect set up for buyers to be inspired to bid against each other.
Trusting your Agent
The first step is finding an experienced real estate agent you trust. Remember that asking your agent to do a CMA is the first step in listing your home, but there is really no risk. If the numbers do not work now for your needs, or if they don’t make sense to you, then you have lost nothing. In fact, you have actually gained some knowledge and you are more informed about the current value of your home.
If you decide to list your home for sale, take your real estate agent’s recommendations seriously. He or she has the experience and market knowledge required to get your home sold for its highest realistic price.