Setting The Listing Price of Your Home
The health of the real estate market plays a significant role in determining the asking price for your home. If the market is booming, you may end up getting more than your list price. In some markets, particularly those in California, buyers get into a bidding war and drive the price up. If the market is slow, you might actually have to lower your price.
Either way, the value of a home is ultimately determined by what someone else is willing to pay, no matter how much you think it’s worth.
What Are Other Houses Selling For?
Comparable houses that are currently for sale and have sold recently will give you an idea of how much your house might sell for. A real estate agent will do a market analysis and research comparable houses for you. A lot of factors come into play when evaluating the value of a house, including location, amenities, overall condition, size, features, and the school district.
Another factor is how quickly you have to sell. Perhaps you’re interested in buying another house nearby. You may need to sell quickly to use those funds towards your purchase, which would force you to set a lower price. On the other hand, if you’re in no hurry to move, then setting a higher asking price makes sense.
Each real estate agent you meet with will give you their price and reasoning behind it. The listing price however is ultimately up to you.
Zillow.com is a resource that can be used to view prices of houses currently on the market and ones that have sold recently. It doesn’t always provide great detail about the condition of the house, and some of its information might be out-of-date. Nonetheless, it’s a useful tool that you can use to figure out a price range for your home.
What If Your House Isn’t Selling?
If the market is really slow and you must move, there are a few other options. One is to offer a lease purchase, which involves renting your house to someone with the option of them buying down the road. Another is to provide owner financing. This is where the seller gives out a loan to the buyer. This can be a high risk proposition. It’s something that you really have to be able to afford if the buyer is not able to make payments long-term.
A more reasonable option is to rent the house out and put it back on the market at a later date.
Avoid Asking For Too Much
Most of us tend to overvalue our home. We all have a special connection to it. Because selling a home can be emotional, homeowners aren’t always very objective when setting a price. A realtor has a much better idea of what your home is worth based on the current market. A rule of thumb: if you think it’s priced a little low, then it’s probably just right.
Setting too high of a price could be a very costly mistake. It will turn away potential buyers that would otherwise be interested, and increase the chances of your house being on the market for awhile. The longer it’s for sale, the more people will start to think that something is wrong with it.
Besides, your house will have to be appraised if the buyer applies for a mortgage. If the appraisal is less than the asking price, the deal could fall through. If you want to ask for a slightly higher price than other comparable houses, that’s reasonable, assuming the market is strong. Just be aware of the potential pitfalls.