The one conversation that always brings out the jitters in a homeowner is when they sit down with their real estate agent to discuss what to list their property. Unfortunately, there is no magic formula and no precise scientific strategy where the correct price suddenly appears. If only it could be that easy. But choosing the right price is the number one thing you can do to generate traffic to your home and sell as quickly as possible in today’s unpredictable market.
For many sellers who try and figure out where their house is worth, they look at their home, take the amount they paid for it, add the cost of the home improvements they made, then add it together and believe that is the correct listing price. As easy and wonderful as that sounds, it just doesn’t work that way. Pricing a home is as much an art as it is a science. It really doesn’t matter how much you think your home is worth, or quite frankly what a real estate agent thinks your home is worth. The market and ultimately the buyer tell us what your home is worth.
Establishing a Price
So how is the price of your property determined? The first thing a real estate agent will do is compare your home with similar properties, looking at other comparable homes for sale, tracking the market and making any necessary adjustments when necessary. A Comparative Market Analysis (CMA) is what a real estate agent brings to the table in that first meeting where price is discussed and determined. Here, based on our research, we will show you the range of homes in the marketplace and what makes each different. For example, we look at the age, location, number and sizes of bedrooms and baths, updates and the condition of the home. Then, we figure out where your home fits with the others. By doing this, we are able to come up with a range of value. This is where, and I preach again, on the value of a professional and experienced real estate agent. This is where an agent gives the seller their educated opinion. As I mentioned in my last post, if you interview three agents, there is a chance that they will give you three different prices, but they should all be very close to each other. If you find one that is so far off and giving you a remarkably high estimate, ask them how they came up with the price. Are they telling you what they think they want you to hear? Be wary of anyone that tells you something that sounds too good to be true in today’s buyer’s market.
What if the price is too low?
In the past several years we have seen such a price drop in homes that sellers cringe when they see money slipping from their pockets. We get it. We are homeowners too and the market affects us exactly the same way. No one wants to get shortchanged and pricing a home too low often makes a seller wonder if they are selling it at too good of a price for the buyer. For some sellers, they choose to list their home at a lower price than others in their neighbourhood because buyers may flock to their property in droves and cause a bidding war, driving the price up! Other sellers just want to avoid paying more mortgage, utility and insurance payments and figure that in the long run, the sooner they sell their property, the better they will be. So selling your home for a price lower than the CMA indicates, could end up making a seller more money in the long run.
When it Goes Horribly Wrong
Let’s say a seller neglects to do his research and picks a real estate agent who they know nothing about other than they saw the agent’s ad. The seller neglects to interview three agents and doesn’t even ask if the hired agent is familiar with homes in their neighbourhood, because they incorrectly assumed that all real estate agents know every community inside and out. So by hiring an inexperienced agent, the seller is thrilled when he comes back with a price that is much higher than the other homes being sold in the area. With no traffic, let alone any offers, the home sale goes nowhere fast. Several months later, the listing expires and another agent, once again, with no experience, comes in and drops the price, but still no offers. It is only months later before the home is priced far below what it was originally worth. Why? Because in that time frame, the market dropped even further.
If the seller had done the research, and hired an agent that gave a justified price, the home would have sold much more quickly and at a much better price. Instead, the home languished on the market at a price so high that other agents could only laugh. As the months wore on, and the market further softened, the value of the home dropped further and ultimately, the seller sold at a huge loss. This is not even considering the extra mortgage payments and all that goes along with that. Once a property sits on the market, it becomes stale and dated. It was simply overpriced for far too long and it had a bad reputation among real estate agents.
Can this happen to you?
Let’s hope not. Don’t choose a real estate agent because he or she is a friend or family member. Avoid the agent that promises you the highest price, while others agree on a more acceptable price for your home. Agents that don’t know the community, nor work full-time should also be big red flags.
By staying away from emotional or impulsive decisions regarding the price of your home and working with reputable agents who can give you the best possible advice, you can be confident that you will get the most dollar value out of your Windsor house for sale