Your home is very special to you – no doubt it holds many warm memories, but buyers who are looking at your house have just looked at lots and lots of them and your home is just “the fifth one they saw today”. Unless it’s a perfect match, your home is no more special to them than numbers 3 or 18 were. Therein lies the challenge when thinking about pricing your home.
In very basic terms: Real estate is a commodity, not a product.
With a product the manufacturer makes something, then establishes the price it will sell for. They advertise it, and the public either buys the product or not at that price. Think clothing, TV’s or furniture in a store.
With a commodity, the sellers set an “asking price” and then buyers decide their “bid price”. The buyers assign their own value based on two things: one, what is happening in the market … prices fluctuate daily and are influenced by supply and demand and two ,what are their perceptions of the value of the exact facts, features and benefits inherent in that commodity. The potential buyer’s perception of value determines what your property is worth to them. Think auction.
Also, with all commodities and especially real estate there are two market trends – either appreciating or depreciating which depend on the laws of supply and demand. When fewer properties come on the market than go off, there is a shortage of inventory and prices go up … this results in an appreciating market. When more properties are coming on the market than are being sold, there is an oversupply of inventory, and prices go down … this results in a depreciating market. We are currently in a flat or slightly appreciating market, just having snapped out of seven years of depreciating market.
Your potential buyers are comparing your home to similar ones in your town as well as similar towns. They are visiting other homes for sale that are comparable in size, style, condition and location. They see what your competition is asking, and are also working with their agent to see what comparable homes sold for in recent months. Putting all of their observations and data together they are determining their opinion of the fair market value of your home. Hopefully you too have done some research and have come up with a reasonably similar fair market value and price your home accordingly.
The bottom line is: your buyer is an educated consumer and in real estate both sellers and buyers have to agree on the fair market price of a property in order for it to sell. If you price your home based on your emotional evaluation of how “special” it is, and not what it is worth compared to similar ones in the eyes of a buyer you will lose time and money. Yes – money. A recent study by Zillow, the real estate portal, suggests that overpriced homes actually sell for less money (when they do eventually sell) than if they had been priced correctly from the start.
Of course your home is priceless to you, but it’s the only thing you have to sell … to the home buyer it is not the only choice out there. Because of that you’ve got to be priced at the point that buyers agree with your positioning as it compares to all the others you are competing against. If your thinking of selling, give me a call I can help you sell your home, my pricing accuracy is over 97% list to sell ratio (without any price changes).