Saturday, May 5, 2018 / by Robert Woessner
Determining the Right Price When Selling Your Home by Yourself
Importance of First Listing Price
When it comes to deciding the selling price of your home, you can never underestimate the importance of the first listing price you project to the buyers.
Generally, as the homeowner, you will always have the general idea of the current worth of your property. However, what we are speaking about here is the listing price you are supposed to quote, which will be one of the driving factors to promote the sale of your home.
In this regard, the first listing price must be as attractive as possible to set a good pace for the selling process. While the industry experts advise of only a few successful strategies regarding this, they are worth looking at.
Fast and low is a winning strategy that can guide you in deciding the first listing price. This means if you are looking to sell off your home as fast as possible, list the property 5% to 15% below the market value after studying the current market trend.
This will attract the buyers easily, as they will see a good deal in it. This strategy is the best when you do the sale yourself, as while moving through an agent, you are going to pay a huge commission that needs to be considered.
For instance, the statistics show that on average, buyers across the country are paying 2.5 percent more than the asking price. But this calculation does not take into account the concession or incentive you are prepared to give to the buyer.
Also, if you have brought down the listing price 15% below the market prices, then the implication is that you are only reducing the price 6% to 7% lesser than what you would end up getting while working through an agent.
Therefore, cutting down the holding costs and netting more will work to your advantage. Though the scenario might differ between regions, this can guide you on how to decide the listing price. Making the prudent use of the Internet search pricing secret is yet another way to decide on the first listing price.
In order to trick the buyers, most property owners fix the price using more nines to induce a feeling that the property is cheaper. For instance, some might quote the price as $199,900 rather than $200,000 with the intention of letting it sound more attractive.
However, know that the existing Internet searches are not tuned to reach the buyers effectively if you use this nines strategy. To be clear, the majority of real estate sites employ search parameters that are organized as categorical groups. $175,000 to $200,000, then $200,000 to $250,000, and so on.
Given this trend, if you are quoting the listing price as $199,000, it is likely that your property will reach buyers searching for properties within the $175,000 to $200,000. However, if you quote it as $200,000, then it can figure in searches under both $175,000 to $200,000 and $200,000 to $250,000 categories.
How the Wrong Price Can Hurt Your Sale
Understanding the market and the customer behavior requires a lot of insight into what actually happens in the real estate domain today. If your first listing price has followed an imprudent decision, it could work against you and act contrary to your beliefs.
Therefore, rather than going by what you feel as the working strategy, you need to do research on how things happen in the market. Let us talk about this with an example.
Marking down is one popular strategy that most sellers resort to. We can understand this as follows: it is natural that every owner will want as many dollars as possible over the amount of their property sale.
Therefore, most sellers prefer to quote the first listing price considerably higher than the existing market trend so that, by chance, they can end up inviting unwieldy buyers. Subsequently, during the process of negotiation or delay in selling, the seller will keep lowering the price.
Though there is a likelihood of selling the property for more value if the buyer has not acted smartly, this strategy is considered somewhat unsuccessful. For instance, if the properties are not sold within 30 days of listing, then the buyers might be apprehensive, thinking that there could be something wrong with the property.
Also, some buyers tend to think that if you are prepared to lower the price, they can continue bargaining as much as possible to land the best deal.
This strategy might end up hurting you, therefore, it is very important that you fix up the first listing price in line with the market trends to sell your property faster.
Getting a Comparative Market Analysis CMA (Get for Free from the Agent)
Most home sellers are familiar with the idea of comparative market analysis. This is a popular tool used to ascertain the real value of the property intended for sale.
Comparative market analysis, or CMA, is the process of analyzing the sale deals of homes comparable to that of yours in the region.
This analysis is a detailed one, taking in every aspect of your home in detail. In the first place, you need to understand that this is not an appraisal. The value assigned in this process is quite subjective, based on the belief of the realtor as to how much the home can be sold for.
This document will never have a financial or legal validity, though it is used predominantly by agents to win the listings. In fact, several agents are prepared to give this to you for free.
The principal objective of CMA is to give you a fair idea of fixing up the listing price for your property in line with the market trends so that your deal can be successful. Depending on your choice, CMA can be conducted by considering a given number of sales, or might take into account properties sold within a few miles.
The CMA focuses on aspects like the physical extent of the property, the number of rooms, bedrooms, bathrooms and other components. There are, however, no fixed rules on how to conduct a CMA.
The other features that can be considered include amenities like a swimming pool and fireplace, the location of the property, proximity to landmarks and major roadways, recent improvements made, and so forth.
In a CMA, several useful insights can be gained from recently sold homes, active listings, pending listings, and expired listings. It is not an easy task for the homeowners to secure access to MLS data.
Therefore, it is rather improbable to gather data on the recently sold and active listings. However, the Internet and FHFA can facilitate learning more about home sales that happened in your locality. Some of the most reliable sources to learn about home pricing trends include the Federal Housing Finance Agency, the FNC Residential Price Index, and Real Estate Websites.
When to Raise or Lower
Though you might arrive at a listing price based on the market study and CMA, you might come across some occasions or confusing situations when you might wonder whether you need to raise or lower the listing price.
Here a few things to help you to make the right decision:
Giving an indication that your price is competitive does not invite more customers. The industry today is highly competitive. However, it will amount to suicide if you are attempting to match or beat others.
The price really matters, and often, you will need to raise it to project a better image. Firstly, you will never need a justification on why you will increase the price.
Therefore, just go for it. When you increase the price, you might often find that it yields better results. If you are afraid to do this, you may bundle up more products and services inside the price cover.
Showing some alternative prices to the buyers will enable them to feel the justification for the pricing. Also, know that selling your home for a lesser price does not end up making your buyer happier. In fact, those who keep nagging at a later stage are those who have paid a lesser price.
If people are convinced that the property they buy is an answer to some of their problems, they do not mind paying something higher. At the same time, use this option judicially so that you do not end up harming the deal yourself.
You must also know when you must lower the prices of the property listed. When there is a plunge in the stock prices, home prices also might drop to rock bottom. Sometimes, what plunged on a single day might take years to recover.
Therefore, at times, it might be necessary to endure the falling market in the real estate arena until a balance between supply and demand is realized. If the market is falling and you are miserable trying to sell your property, then it is a good thing to lower the price and get out of the falling market as soon as possible.
Smart sellers lower the prices during a falling trend and complete the deals quickly before much damage is done. Prices of properties in newer subdivisions might fall lower than they are worth.
If several neighbors’ properties in the region owe more than what they are worth and are on the verge of foreclosures in the near future, that scenario might affect your property value, too. This is because most such homes can be resold at bargain rates. Under this scenario, you must also think of lowering the price.
Do not get misled by the statistics that project only a modest decline in the sale prices. Several sellers might announce some attractive incentives and credits in order to sell their properties.
Therefore, when the statistics are showing only modest price drops, the sellers might end up netting more than what they would otherwise lose due to the drop. In cases where higher end homes are selling better than starter homes, the median sales prices could mean false readings.
Under such circumstances, the drops in median sales prices reported will understate the degree of downturn. Know that in some areas, it is possible for the median sales price to rise even when the home prices are falling.
When your home price has dropped by about 15 percent and the price of your replacement house have dropped equally, the market is in your favor if you are selling the property in order to trade up.
You might even consider lowering the price if your mortgage payments are actually bleeding and you are losing considerably month after month when the sale is delayed.
Never go by the advice of unethical real estate agents who will buy your listing saying that you have quoted lower than what you could have. Eventually, they might ask you to lower the price once you have paid them for the listing.
Also, do not be deluded if the neighbor selling his property is quoting an escalated price.
Your neighbor unrealistically quoting the price of his identical property at $300,000 does not mean your house is also worth that much. Therefore, you need to exercise your discretion to know when you should increase or lower the prices you have quoted.
Upgrades to Consider
Remodeling and home improvements can often help get a better price for your home. Therefore, it is typical to see several homeowners resorting to a series of improvements and refurbishments before listing their properties for sale.
However, this topic needs to be approached cleverly since you must be on the winning side and not on the losing one.
Also, with regard to home improvements, it is worth contracting professionals to do them neatly rather than putting your hands on them and rectifying the mistakes done in the process by hiring someone later.
While embarking on renovations, do not give a play for your personal preferences and tastes. Look at the renovations from the point of view of the buyer.
For instance, what you think will be a matter of concern for the buyer might actually be a positive side. Also, what you might think of as impressing your customer might end up ruining the earlier look and feel.
Therefore, be careful about what you are spending on renovation or upgrades. The changes you bring in must be harmonious with the environment without striking a cord of difference.
Upgrades to older homes carry more impact than those of newer homes. Also, the upgrades you intend should match with the rest of the house. The high-end upgrades you intend to do might not give better returns on investment in cases where the homes are not expensive. Therefore, take into account all these aspects before embarking on a renovation or upgrade.
Some of the most impressive kinds of upgrades you can attempt include replacement vinyl siding, bathroom remodel, vinyl replacement windows, kitchen remodel, basement remodel, adding a deck, replacing the roof, installing a steel replacement front door, weather stripping around windows, installing solar energy plants and programmable thermostats, and landscaping.