When buying or selling real estate here are 4 price strategies that are the most common that I have come across in my real estate career.
Clearly Overpriced: Every seller wants to maximize the amount they receive for their home. They may have an inflated value of what their home is worth because of: getting opinions from un-informed advisors and friends, having an over financed home, or they have renovated their home to a standard not consistent with their neighbours. My experience has been that unless this home has been on the market for three to four months, the seller will not drop his price. And if he does, and your offer is accepted, will the appraisal that your lender will order, what if the appraisal is below the offer price?
Somewhat Overpriced: About 75% of the homes on the market are overpriced. These homes sit on the market longer than they should as well. There are two main reasons these homes are overpriced. The seller believes that the home is worth more than the market has indicated, OR, the seller has left room for negotiating.
Priced Correctly At Market Value: Some sellers understand that real estate is part of the capitalistic system of supply and demand. They have realistically priced their homes based on a thorough analysis of other homes on the market prepared by a good and knowledgeable Realtor. These competitively priced homes usually sell in a reasonable time and very close to asking price.
Priced Below the Fair Market Value: Some sellers are motivated by a quick sale. These homes could attract multiple offers and sell fast, and, at or above, the asking price!
As a buyer, do you know which strategy was used? As a potential seller of a home, what will your strategy be and do you really have an accurate understanding of the market?
I hope I have raised your awareness of how prices are determined and if you are either buyer or a seller, quality representation can save you a lot of time and money.
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