Tips to Accurately Price Your Home

by : Jeff Hammerberg

An unrealistic asking price may impede the sale of your home. But undermining your profit margin is also unwise. Pricing your home accurately – especially in the middle of an entrenched buyer’s market – is always a bit challenging. But if you’re trying to sell a house or condo these days, intelligent pricing is critical. Those who are off the mark by a slight amount may wind up off target completely in terms of attracting a qualified and interested buyer, and those who price their home unreasonably high may be shooting themselves in the proverbial foot.

Here are four tips for figuring out how to price your property, without “leaving money on the table” by selling yourself short:

Know Your Primary Motive for Selling

Understanding why you want to sell is the first step, and the most important. If you are selling to capture capital gains, for example, your strategy regarding pricing will be much different that if you are selling to move to a new job in another city. Those selling to avoid imminent financial problems, for instance, may need to price their house lower – and sacrifice some of the proceeds – in order to inspire a faster sale. If you don’t need to sell by a particular deadline, you can afford to price your house at the high end of the spectrum and “fish” for a while for an interested buyer. After a couple of weeks you can adjust your price lower if you aren’t attracting enough interest.

Find Out What Buyers are Paying for Houses like Yours

To find out what buyers are paying for comparable houses, have a Realtor print out a market report that shows recent sales data for nearby homes with similar amenities and square footage. Compare the asking prices to the actual sales prices, to find out if other sellers have been pricing their houses too high. Accurate pricing usually reflects a gap of no more than 10 percent between what is asked and the final price. Study the "time on the market” data, to see how long it takes houses to sell. If they are selling faster than average, it may be because they are priced below average. If they stay on the market longer than normal, it may indicate that they are overpriced or need repairs that are not discounted from the price.

Price it Objectively

When housing prices are falling steadily it is easy for sellers to cling to a false sense of what their properties are really worth. That’s fine if you are just testing the waters, but it can be counterproductive if you intend to sell within a reasonable amount of time. Take the average price per square foot you gathered from your data analysis and multiply it by the number of square feet in your home to find out what the market’s average valuation for your house happens to be. Add value for extraordinary features like a new kitchen, a garage apartment, or an oversized lot. Subtract for such things as needed repairs or peeling paint, less bathrooms than other comparable homes, or heating and air conditioning systems that will soon need to be replaced.

Be Decisive

Decide ahead of time what constitutes a reasonable offer to purchase. Knowing what your bottom line final price is will help you make quick, clear decisions under pressure. Establish a price range that you consider acceptable, and if you aren’t getting results, be prepared to lower your price at strategic intervals of time. A good way to plan ahead for price adjustments is to create benchmark dates on a calendar. If you reach a benchmark and have not gotten the results you expected, be decisive and businesslike – not emotional – about changing your price. Be ready to recognize if the time is not right for you to reach your goals. Trying to sell when you aren’t convinced you’re ready to can be frustrating and will likely cost you more money in the long run. It may be better to wait for the market to rebound, perhaps leasing your home or taking out a home equity loan to tide you over in the meantime.

Another important thing to keep in mind regarding pricing is that buyers and Realtors search the MLS database using specific price parameters. If you aren’t within their search range they won’t even know your house is on the market. For example, if you hope to attract buyers who are shopping for homes within the $250,000 - $300,000 range but your home is priced at $315,000, you may be pricing yourself out of your target market. Similarly, if you are asking $300,000 for your home you may be connecting with a whole pool of buyers that wouldn’t find you if you were priced at $301,000, because they are only searching up to the round number price of $300,000.