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Location may have the most effect on value but price is without question the most important factor controlling the sale of real estate. Any home will sell in the long run, how long will it take depends on the price. There are three primary factors when it comes to selling and pricing real estate – location, condition, and price. Nothing can be done to improve a property’s location, and it is often not cost effective to change a property’s condition, but the seller has complete control over the price.
Think about it this way – you may really want to buy an antique wooden boat. You hear about one for sale, in mint condition, across town but the only problem is the price, the owner is asking $150,000! Although you really, really want it, there is no way you will pay anywhere close to $150,000, in fact you know that the most such a boat has ever sold for is about $200,000 and that was for a very rare model, which this one is not.
After exhaustive research, you determine that the boat in question is really only worth $100,000, at most. So why don’t you go make an offer? Well, let’s face it when you see a price that is so high compared to the actual value it makes you think that the seller is either difficult to deal with and is out of touch with reality or that he must not really want to sell the boat. Instead it seems that he is just fishing for the one fool in the world that will pay $150,000 for a boat that is worth $95,000. So you don’t even go look at it or call for more information… you just keep searching the various websites to find the boat of your dreams.
Obviously, this analogy represents a house, and you certainly do not want to be in the shoes of the seller described above.
“Wiggle room” = A Mistake
Most sellers think that it is necessary to “leave a little wiggle room” in the price. They think this because they think that all buyers will make aggressively low offers…no matter what the asking price. This is often incorrect.
Buyers pay the fair market value …in other words they will pay you what it is worth! These days, buyers are very well educated, and well informed – they will know if your house is overpriced. If your house is overpriced, many buyers will not make an offer, simply because they do not want to offend you, or because they figure that their offer is so low that it will be rejected.
Your job is to find out what it is worth and price it at or near that value.
This is where brokers and/or appraisers come into the picture. The right way to price your property is to have a professional REALTOR/broker or appraiser prepare a CMA (Comparative Market Analysis) on your property. A CMA involves finding recent sales of similar properties, adjusting for any differences, to arrive at a current market value of your property. Once you have this value you should have your broker set the asking price at no more than 3% to 5% higher than that current market value.
If you do this, your property will sell quickly for a price equal to exactly what it is worth, or higher! Buyers as a general rule do not make “low-ball” offers (often for the reasons mentioned above), there are some rare occasions when that happens but the majority of initial offers are 5% or less below asking price.
If sellers price their property correctly the buyers will know it immediately because, just like in the boat example, buyers spend every spare moment searching the internet for a home, and they have made themselves experts on the market value of the particular type of home in the particular area they desire. For this reason the buyer also knows when a property is overpriced. Most buyers will not even go look at a property that is overpriced, they say to themselves “why bother?” they assume that the seller is unreasonable and/or is not truly interested in selling the property.
When a house sits on the market for an extended period of time, the conversation often turns to “what is wrong with this house?” Quite often, it turns out that the house hasn’t sold because it was severely overpriced long ago, and though it may be priced well now, it still carries a stigma because of the lengthy time on the market and it will likely sell for less than it is really worth.
The moral of this whole story is – buyers will pay what it is worth – a seller’s job is to find out what it is worth and set the asking price 3%-5% higher than that number…then sit and wait for the offers to come in.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]
The post Location, Location, Location, and Price! (How to Price a Home For Sale) appeared first on Suzie & Ed, Diane Turton, Realtors.