Everyone who sells a house wants to realize as much money as possible in the sale of their home. But a list price that is too high often gets the seller less than market value! The market value of a house is the price that a willing and knowledgeable buyer and seller will agree upon. Only the market value is of importance to the buyer!
Pricing your home accurately and within 2-4% of the market value is essential. Serious buyers with money and motivation quickly learn the market value of your competition. They are not willing to waste time looking at overpriced properties!
The market value of your house is based on 4 factors:
- Recently sold prices of other comparable homes in your neighbourhood.
- Market trends, which may be increasing or decreasing the values in your area.
- The condition of your home at the time of viewing.
- What you are prepared to negotiate in the agreement of purchase and sale
So with all this in mind, let’s see how your initial list price can directly affect the final market value of your home, which is the final price you will realize in its sale.
The chart on the left shows the relationship of activity, (the interest among agents and buyers), versus timing over the first few weeks of a house going on the market for sale. Statistics show that a property attracts the most excitement and interest among agents and buyers when it is first listed. Interest peaks usually around the third week, dropping off sharply after weeks 4 and 5, as purchasers either move to make other purchases or turn to newer inventory.
After the activity has declined to a trickle, or less, the seller has no choice but to reduce the price. When a property is reduced in price, interest is rekindled among agents and buyers alike, directly depending on the amount of the reduction. If the price slowly inches down, the activity will die down as time goes on. However, a reduction which reflects the real market value can usually generate the needed activity to get the property sold, and still at a fair price.
The last chart shows how failure to bring the price into line with fair market value within a reasonable period of time can lead to a selling price below market value! When a property is priced too high and does not sell in the beginning, the seller reduces the price in an effort to promote a faster sale. As more time goes by, the seller continues to reduce the price. However, because less interest is generated the longer a property remains on the market, the price drops until the house finally sells at a price below market value.
How do you determine what the initial asking price should be?
- Look closely at the market values (recent sold prices) for comparable properties in your area.
- Discuss with your listing Realtor’s suggestions on what the market value of your home should be. (Ask yourself what you would pay for the house if you were the buyer).
- Set your price within 2-3% of the market value.