 Think Carefully Before You Set Your Price
If you're selling your property, one of the first steps you'll take is setting an asking price. This requires the ability to find a balance between attracting solid offers and receiving top dollar.
In a Hot Seller's Market you'll have a clear advantage, and in a Hot Buyer's Market you'll have challenges, but you can still be successful if you work with a professional real estate advisor that knows what to do.
The bottom line: this is a Buyer's Market so over-pricing is a no-no.
But if you price it right it should sell much quicker than all of the other inventory on the market, because agents and sellers aren't really pricing things correctly overall. In other words, there are some advantages to being a Seller in this market. You just have to understand all of the mistakes people are making, and then make the right moves.
As you work with your professional advisor to set your price, you'll want to recognize the factors that may prompt you to raise your asking price too much when it isn't warranted. Some of those factors include:
- Upgrades have been added. While many property improvements will help you get back a good chunk of your investment, it often won't give you all of what you paid. Also, the more personal the improvement the less likely it will be viewed favorably by potential buyers.
- You need money. Need for money doesn't dictate the value of real estate.
- You're moving to a higher-priced area. What you buy has little relationship to what you're selling, until you get into subjects like tax deferral (1031 Exchange).
- The original purchase price was too high. You make money when you buy real estate if you buy right! You get your money when you refinance and cash-out, or when you sell.
- The seller lacks "real" comparable sales to prove what the market value is. This is often due to bad agent representation. You also have to be careful of an agent's over-excited behavior about possibly getting your business. They tend to overpromise. Sometimes this is just a lack of experience and expertise. Sometimes they overprice your property in conversation just to get you to sign the contract, but they know it won't sell and plan on driving you down in price later.
- The seller wants negotiating room. You have to know how to negotiate, and negotiating is NEVER about price alone. Time, motivation, needs, cooperation, and many other factors go into structuring a deal.
- You don't have to sell, so you're not motivated. On the other hand, if you're in a neutral or buyer's market and you do want to sell, you'll really need to be cautious and wise in setting your price.
Generally, the asking price is set slightly higher than market value.
You should assume that negotiation will be necessary to reach an agreement with the buyer. But if you price your property too much above market value, you'll get fewer showings and offers in which the potential buyer is low-balling to determine how much you'll drop your price. It's better to develop other things to negotiate with in addition to price.
You'll want to establish your priority list: Are you more concerned with time or price, or do they both matter? You'll also want to decide whether you think the agent's suggested price is reasonable and whether you'd pay that amount if you were a buyer.
A professional real estate advisor will help you point out your property advantages and disadvantages that you may not have thought about because you are too close to the property, and not as objective. A real professional will just explain how things are and help you make the right decision.
A third party will help you think of your property as a product rather than a personal investment. Positive and negative selling points should be considered to determine an effective strategy. At that point you can decide on a price that you think is in line with the market.
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