Pricing your home before placing it on the market can be an incredible challenge. There is no fool-proof formula, no surefire price for which each type of home should be sold.
There are significant dangers to overpricing a home that can effect its ability to sell even after the price is reduced. This is why it is especially important to do as much research as possible to determine what your home is worth before it goes on the market. It will be worth the extra work to get it right the first time.
How overpricing hurts a sale
According to Trulia, there is a myriad of reasons a seller should not overprice a home just to see if someone would be willing to buy it at the higher cost. First of all, most buyers are very informed. They've done the research, and they know what a home like yours should cost. If it is priced too high they may not even take the time to look at it. In addition, you'll make it easier for the competition in the area, as buyers will pass over your property in favor of homes that are more fairly priced.
One of the biggest reasons its important not to overprice a home is that the first 30 days on the market are the most significant. After that period, the listing is no longer new and buyers' attention will move on to other properties. If your home is priced too high during that golden period, it will be harder to sell later even at a reduced price.
The Washington Post said if no one has made an offer after 30 buyers have seen the home, it is time to lower the asking price.
How to determine the right price
To get the price right the first time, start out with some extensive research. HGTV suggested taking a look at past sales of comparable homes in your area. Homes that are still on the market may help you understand how not to price your home, as price may be a reason those homes haven't sold. Sellers also need to put themselves in the mind of the buyers and ask themselves what they would be willing to spend on the home. They should consider its strengths and weaknesses, and speak to their real estate agent about what buyers in the current market are looking for.
Realtor.com said supply and demand affects pricing, too. If it's a seller's market - meaning there is high demand for houses and a low supply - you can price your home higher than if there were an excess supply of homes compared to the demand.
Don't forget that your asking price is a starting point for negotiations. While it should be fair, HGTV said it should also make both sides feel like they have room for some discussion. Buyers may also ask for a reduced price if issues are discovered during a home inspection. Some sellers account for any known issues in the initial asking price, which they can explain to the buyers at the negotiating table.
Drew Nelson, a real estate agent in California, told Trulia that when the price needs to be reduced on an overpriced home, the home often ends up being sold for less than it would have if it had a reasonable price to begin with. It's best for a seller to do everything in his or her power to determine an appropriate asking price before listing the home. Otherwise, it could take a lot longer to sell and will end up going for less than its worth.