Determining the “right” selling price for your home will take some work. If the set price is too low, you could lose thousands of dollars. If it is too high, the home may not sell within your time frame, costing you time, money and anxiety. The “right” price is a balance between the maximum amount the current housing market will allow, your “competition,” and your own time limits in selling. A reasonable time frame for selling a house may be between 30 and 90 days. If a house is on the market too long, potential buyers may avoid the house, wondering if something is wrong with it.
An excellent first step is to have a Comparative Market Analysis done on your house. This information details the current housing market in your area, showing you what houses similar to yours have sold for recently. The market analysis should also list your “competition” – houses like yours which are also on the market. With this information in mind, you will also want to consider the following points before deciding:
- Location -This is an important factor in pricing. Look at both the area in which the house is located as well as the surrounding neighborhood. Does the house back up to a busy street, is it on a cul-de-sac, etc. Try to put yourself in the buyer’s position: what are the tradeoffs and advantages of your property?
- Features – Does your house have specific features that set it apart from other houses in the area, such as a spectacular view, a pool, mirrored closets, room additions?
- Condition of the House – Has the house been adequately maintained during your stay? Are there minor or major repairs that could make a difference in the immediate sale of your house?
- Age of the House – Potential buyers will want to know the age of the plumbing, furnace, roof, appliances, etc. If anything has been replaced, this could add to the value of your property and the sales price.
- The Current Market – Is today’s market a “buyer’s market” or a “seller’s market”? A “buyer’s market” means there are several similar houses for a buyer to choose from. Usually, interest rates are attractive and prices are steady. A “seller’s market” is the opposite. Interest rates may be low or high, but housing prices are on the rise, and there are few houses to be sold.
- Your Time Frame – How long do you have to sell this house? What was the average time on the market on a comparable home? Can you wait while a buyer arranges financing? Does your purchase of another home depend on this deal closing quickly?
With these points in mind you should be able to determine a fair price for your house. A word of caution: Avoid the temptation to “pad” the price excessively, thinking it will give you negotiating room. Most buyers have limitations on how much they can spend. If your property out-prices other properties in the neighborhood, it could remain on the market longer than you wish. Even though you may be planning to lower the price later, studies show that the longer a house is on the market, the lower the price at which it is finally sold, compared to the original list price.
Although not a specific part of the price setting process, concerns about the amount of profit realized from the sale, tax regulations regarding the sale of property, and settlement or closing costs should be addressed. This is particularly true in markets with a predominance of FHA/VA buyers or areas where lender “points” are absorbed by the seller.