For you to understand how much to offer for a home you’re interested in, it’s important to know how sellers price their homes. Here are 4 common strategies you’ll start to recognize when you begin to view homes.
Every seller wants to realize that most amount of money they can for their home and real estate agents know this. If more that one agent is competing for your listing, an easy way to win the battle is to over inflate the value of your home. This is done far too often, with many homes that are priced 10-20% over their true market value.
This is not in your best interest, because in most cases the market won’t be fooled. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks:
• your home is likely to be labelled as a ‘troubled’ house by other agents, leading to a lower than fair market price when an offer is finally made
• you have been greatly inconvenienced with having to constantly have your home in ‘showing’ condition for nothing. These homes often expire off the market, forcing you to go through the listing process all over again.
About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there’s a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you both in terms of time on the market and ultimate price received.
Priced Correctly at Market Value
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time-frame and very close to the asking price.
Price Below the Fair Market Value
Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast – usually in a few days – at, or above, the asking price. Be cautious that the agent suggesting this method is doing so with your best interest in mind.