There is a science to pricing your home, but it all comes down to supply and demand. No two agents will price a property the same way, so you should never choose an agent according to price. Someone who gives you an inflated range could have you disappointed in a couple weeks. Plus, the listing price can only be determined by you. So, although you should consider the range your agent recommends, you also need to do a little digging of your own before correctly pricing your home.
Overpricing vs. Underpricing
There are disadvantages to both overpricing and underpricing. A home priced too low may move fast, but how are you going to feel knowing you could have potentially made a lot more money on the sale?
Listing your home too high is not doing you any favors either. You can always do a price reduction in the future, but you lose the freshness of your home’s appeal as a new listing after two or three weeks. You are not always going to attract buyers wanting to negotiate. In many cases, you will scare potential buyers away; they won’t even view the home based on price. Plus, since a lot of sellers are not willing to entertain a lower offer until their house has been on the market several weeks, buyers may assume you won’t be willing to negotiate right away either, even though you are.
Look at Comparable Listings
Your agent can provide you with a comparative market analysis. This will show you what similar homes are priced at in your area. It will also reveal their amenities and list homes currently in escrow, as well as those recently sold.
If you are not working with an agent quite yet, pull comparable listings and sales within a half-mile radius. If the property is rural, you can explore a larger radius. Pay attention to the dividing lines of neighborhoods, as well as physical barriers, including highways, major streets, and railroads. Comparing your home to one across town is apples to oranges. You should also compare the age of the homes, square footage, and features.
Look at Sold Properties
Look at properties that expired or have withdrawn listings. You want to see if they were taken off the market and then relisted. This will give you an idea of how long it may have taken them to get the price right. Compare original listing prices to sold prices to determine price reductions.
Looking at pending sales can also be helpful in seeing how long the homes were listed and how much prices were reduced to sell.
When pricing your home keep in mind that negotiations will generally be ongoing to the end. Getting the price right from the beginning will allow you to attract those ready to buy. True buyers are generally shopping the market and comparing listings. You want them to request multiple showings. When they do, you know you got your listing price right because you are competing with similar-priced homes in the area that your target buyer is also looking at.