A good pricing strategy should be sharply focused on the competition. You need to think in terms of what is going through your potential buyer’s mind when shopping for a house. Do they have a lot of similar houses to choose from nearby or is inventory limited? Are most of the similar houses for sale in better/worse condition than yours. Is your house the only one on the water or do the other houses all have pools and yours does not?
When you step into the buyer’s shoes, you will have a better understanding of how your house compares to the competition. Afterwards you will be better equipped to decide on whether to list for more or less money. Increasing or decreasing your listing price is fairly obvious, but how much money exactly is not always so simple.
With extremely limited inventory, it seems like you can just push and push, but the reality is that it depends quite a bit on price range. If your home is immaculate and worth around $230k, you are mostly going to be dealing with first time home buyers. This means, the vast majority of buyers for your home will be getting a mortgage like FHA or VA and your home will need to appraise. In an extremely hot market, you can possibly sell for $5-15k over appraisal, but it really will not help you to list for $20-30k over what you think it is worth. In this situation, we have been very successful simply listing this home for $230k to invite bidding wars in which buyers bid up the price to the absolute most they are willing to pay over appraisal.
In the same market with a house that is worth say $500k, you can absolutely shoot for the stars. Asking for $50k more than you think it is worth could pay off if your house is the only one on the market with the features a $500k homebuyer is looking for. These buyers more often are putting a lot more money down and might be willing to go far over the appraised value for the only home on the market that fits their desires.
When you face heavy competition or your home simply is not quite as nice as the ones nearby, you should focus on pricing to sell. This means that should settle on a listing price that makes buyers think twice about buying the house down the street just because it is nicer. Let’s say you and your neighbors have the same model house but theirs is updated inside and your house needs a new roof and has an old AC. Price your home for $5-10k less than your neighbors and you can bet the neighbors house will sell first and you might face a needed price drop a few weeks later. It is hard, but you need to be realistic and realize that for someone to buy your house over the neighbors is going to require a decent price difference. You will generally need to list for $15k to even $25k less than the neighbors to really be a contender in the buyers’ minds.
Before you list your home for sale, choose an agent with an intimate knowledge of the market. Use a J&J Realtor once and you will never want to go anywhere else when selling a house. Give us a call or fill out the form here to get started.
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