How To Price Your Home
At first, pricing your home seems simple. An appraiser will tell you how much it’s worth, and your realtor can provide data from comparable listings (comps) in your area. Those numbers will help you settle on a price that buyers should be willing to pay, right?
Not necessarily. An appraiser’s estimate of your home’s value may not reflect what others are willing to pay for it. Nor are comps likely to offer insight if market conditions have changed since the listings were created. If you’re selling in a buyer’s market, you may have to sell your property at a discount to its current value. In a seller’s market, the opposite will be true; buyers may be willing to pay a premium.
There’s no perfect formula for pricing your home. But the following tips will help you to choose a price that’s appropriate for the market conditions in your area.
Have Your House Appraised
This is the first step. Bring in a professional appraiser to determine your property’s value. Note that while appraisers are unbiased and typically follow a formula, their conclusions often vary. Three appraisers are likely to deliver 3 different estimates (although the estimates should be close to one another).
If the appraiser’s estimate is lower than the amount you feel your home is worth, you can hire another appraiser for a second opinion. Another option is to explain to the first professional why your property is worth more than his or her estimate.
Take Comparables Into Account
Compare your home to others that are listed for sale in your area. Focus on those that offer the same square footage (or nearly so) and are located no more than a half mile away. How much did the sellers list the properties for? How long have their homes been listed?
That information will give you insight into whether prospective buyers think the listed properties are priced appropriately. If the listings have been on the market for 90 days or more, it suggests buyers think they’re priced too high.
It’s also helpful to review recently-sold properties in your area (again, they should be similar to your own). Find out how long they were listed on the market before they sold. Did they sell for a price that was close to their listing price? That information can also inform your pricing decision.
Review The Local Market’s DOM
DOM stands for “days on market.” It reflects the age of a listing. The DOM represents the number of days a listing is active before the property sells or the listing agreement between the seller and the agent expires.
As a rule, a higher DOM suggests a listing is priced too high. That may be due to insufficient market demand. It may also indicate that prospective buyers find the property undesirable. Some sellers whose houses have been on the market for months have their agents remove and relist them in order to reset the DOM.
Think Strategically And Lower Your Price
Most sellers adopt the same approach to pricing when their houses fail to attract acceptable offers. After 30 days on the market, they lower their prices. If, after another 30 days, buyers still fail to materialize, they drop their prices again. This process continues until the seller loses hope of selling his property or becomes unwilling to sell it for the price he believes is necessary to generate interest.
If there’s limited market demand, you can shorten this process by listing your property at the lowest price you’re willing to sell it for. That way, you can avoid the monthly drops in price.
Taking that approach accomplishes two things. First, it allows you to undercut other sellers and stand apart from the pack. Second, it allows you to avoid giving buyers the impression that no one finds your home desirable.
To recap, pricing your home is more complex than just following an appraiser’s estimate and trusting local comps. Assigning the right price entails considering a number of factors. It’s important to take into account recent sales in your area, days on market, and strategies to attract buyers’ attention when demand is limited.
It’s worth putting in the effort. The first two weeks during which your house is listed are crucial. That’s when prospective buyers form their strongest impressions.