pricing your home to sell

The most important decision you’ll have to make regarding the sale of your home is how to price it. How you price your home will not only determine how quickly you sell; it will also determine how much money you walk away with.

So you must put care into coming up with an asking price for your home. Setting an asking price for your home is tricky. On one hand, you want a price that is competitive with prices of other properties on the market so that you can get offers on your property. On the other hand, you want the asking price sufficiently high so as to bring you the highest possible return after negotiations.

While very few sellers actually under-price their homes about two-thirds of all sellers make the mistake of overpricing! As a result, homes can sit on the market for many months requiring the seller to reduce thier asking price until the home sells.

A survey suggested that the typical seller would have sold more quickly and without lowering the asking price had they priced thier home correctly in the first place.

Here are some reasons why so many people overprice their homes?

1. Inaccurate Assumption

To see the folly of such an approach, imagine that you want to purchase a Honda Civic, “the car that sells itself”. You go over to your local Honda dealer who informs you that he’s asking $50,000 for the car! You reply that is you had that kind of money, you could buy a Mercedes or BMW. “Well”, answers the dealer, “I’m trying to put two kids through school. I really need to get $50,000 for it.” You walk across the street and buy a Toyota Tercel instead.

2. Emotional Attachment

Many homeowners are emotionally attached to their homes. Everyone feels that their home is special, and you’re probably no exception. After all, you chose that home over dozens of other you looked at. You furnished and decorated it, adding personal touches. Perhaps you watched your children grow up there. All of this can cloud your judgment and affect your pricing expectations.

Even Realtors are prone to making these mistakes when it comes to thier own homes.

To make sure that the price is right, you must detach emotionally from your home and try to think of it purely as a business asset.

3. Denial

Another reason why people overprice their homes is that they find it hard to accept the value of their home. Denial is the natural way that human beings react to unwanted news. 

4. Greed

Let’s face it, greed is one of the most powerful human motivators. We all want to get the most we can for ourselves and our families, and usually this involves money. So as we get ready to sell the single greatest financial asset we own, it’s only natural that we start to have fantasies that somebody is going to come along and pay us more money than the place is worth.

5. Room For Negotiation

Most people are under the mistaken impression that you have to start high in order to settle at the right price after negotiations. The facts show otherwise. As the statistics at the beginning of this page indicate, homes that are priced correctly sell very close to the asking price and often for more then asking price.

6. Lower the price later

Faced with the choice between overpricing and under-pricing, most people would choose the former, and understandably so. The feeling is that an asking price can always be lowered if it turns out to be too high.

The problem with this strategy in a declining market is that by the time you do lower the price, the home will be worth less than when you started. This is known as “chasing the market”.

7. Bad Advice

Many people price their homes according to advice given to them by their friends, relatives, lawyers, or accountants. These advisors may be bright and may be experts in their fields, but they are usally unqualified when it comes to pricing a home.

So if you want to sell quickly and for top dollar, set a seductive asking price. Pay attention to how the price sounds. An asking price of $699,898 sounds so much more appealing than an asking price of $700,000, even though it’s only a difference of $102.

As you may have gathered by now, pricing a home is not an exact science. You’ll know whether or not you’ve priced your home correctly after you’ve had it on the market for several days. Ask your Realtor how long the average home is staying on the market in your area. If you’ve priced your home correctly, you should be able to sell it or at least get offers within half that time period. If you haven’t at least gotten offers, then you should go back and re-evaluate your pricing.