If you’re putting your home on the market, especially in a real estate market like we currently have in the Metro Denver area, your first price should be your best price. In seller’s markets, where prices are going up and buyers are competing for homes, you may be tempted to try listing it at a high price just to see if you can get it.
Don’t do it.
Experienced real estate agents will advise you to price your home appropriately from the beginning since it is critical to getting it sold quickly and at the best price. Research shows that overpricing your home and then dropping the price several times while it languishes on the market usually leads to selling it at a much lower price than what you originally should have asked for. The longer a home stays on the market, the deeper the discount is likely to be off the original price.
How Overpricing Creates Problems
Time:
When you put your home on the market, you want it to quickly spark interest in a number of buyers, and you certainly want to sell it quickly. The selling price should be at a price point similar or better to comparable homes in your area. If it is priced too high, it may be ignored, or worse, noticed by buyers and placed into a “wait and see” category. If it takes you months to sell your home, you may be forced to take a price much lower than your original asking price.
Mortgage Payments:
Every month your home remains on the market, you are making mortgage payments. Every month it goes unsold, you pour more money into the home that you will not get back. With a high price, there is no negotiating up. If there are no takers month after month, you are giving money away that you should not have to.
Perception:
The perception of your home as a desirable product is important in real estate transactions. The longer your home sits on the market, the more you risk a negative shift in this perception – something you want to avoid if at all possible.
When your home first goes on the market, it will be considered by any number of buyers as long as the price is comparable to others and as long as your real estate agent markets it correctly. It may or may not be what everyone wants, but is at least perceived in a neutral way.
Appraisal Problems:
Sometimes, you may be lucky enough to get an offer at your desired price. A buyer may agree with you that your home is something special, and worth paying for.
For your buyer to get a mortgage, they need to have your home appraised. Your buyer’s appraiser will use the prices of nearby, comparable homes – or “comps” – to help determine the price of your house. In cases where homes do not appraise at the sale price, a seller will either need to reduce their price to meet the appraisal or the buyer will need to come up with additional funds to make up the difference. This is one of the bigger risks of pricing a home too high.
How to price your home correctly
Many homeowners want to set their list price based on what they paid for their home, the balance of their mortgage, or on the profit they want to make so they can move into another home. In reality, your home is worth only what the market will bear. If you price your home too high, some potential buyers won’t want to look at it at all, while others will simply walk away without making an offer.
Hire An Experienced Agent:
If you’re interviewing several Realtors to choose a listing agent, you may be tempted to pick the one who suggests the highest price for your property. But sellers, like buyers, need to beware. The Realtor who provides the best comparative market analysis and explanation of how your home should be priced will be more likely to sell your home quicker and for a higher price than someone who tells you only what you want to hear. Look for an agent that has been in business for a few years, and that tends to sell homes quickly and for near the original offering price. An honest agent that doesn’t NEED your business is critical. Understand what I mean by the word “need”. Agents that need business tend to give advice that suits them and not their clients.
Get A Comparative Market Analysis:
A comparative market analysis should include sales prices for similar nearby homes that sold in the last month or two. In addition, many Realtors include prices for homes currently on the market that will be your competition, as well as homes taken off the market because they didn’t sell. A knowledgeable Realtor can factor in all of these issues in the context of your local market conditions, including whether home prices are rising or falling and whether it’s a buyer’s or seller’s market.
Don’t Use Zillow Estimates as Your Guide:
There are some sellers who mistakenly believe that Zillow pricing estimates are a good gauge of estimating real estate market value. An online valuation tool is never going to be able to replace a local real estate agent who knows the market. Don’t be foolish enough to believe a computer algorithm can determine the value of millions of homes across the country.
Go In A Little Lower Than The Value:
You should not be afraid to price your home a little below the comps in your area. If it is priced well, you will see numerous offers and then you will be the one with the upper hand. Pricing just a hair below the market is a common strategy in real estate that works really well if you can achieve the goal of getting multiple bids on your property. This is the best position you can be in as a seller because buyers often times let their emotions dictate their decision making and not use sound logic. A buyer overpaying for your property in a multiple bid situation is not out of the realm of possibility.
Choose the right professional to help you with your home sale and then listen to your Realtor’s advice and your transaction is more likely to go through quickly and smoothly from the beginning.
Let the professionals at the Bandy Team help you buy or sell a Denver property, contact us for a no-obligation consultation. If you’re thinking about buying a Denver home, we can show you some terrific property in Denver, including real estate in Parker , homes in Castle Rock , as well as, properties for sale in Highlands Ranch.
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Until next time,
Marianne
Marianne Bandy
The Bandy Team
Keller Williams Park Meadows
720-466-3790
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