Pricing Your Home Right—the First Time
Price is undoubtedly the single most important factor to consider when you're selling. When deciding the best price to list your home at, you have to decide between two competing options. First, you could list your home competitively, in line with similar properties in the area, or you could speculate, setting a price above the average market value of your home. Let's take a moment to explore each scenario.
A Closer Look at Home Pricing
Let's say you priced your home below market value while the Calgary homes market shifted suddenly in the seller's favour. The most likely result is that you'd gain immediate interest in the property within a week, and offers between 98 and 100 per cent of your listed price. You might even receive multiple offers at prices that range above your original asking price. Either way, the sale is finished - you may have gotten a better price had you waited 30 to 60 days, but there are no guarantees.
On the flip side, let's say you speculated a bit. Instead of pricing competitively in step with comparable properties in the area, you set a price that was between $10,000 and $15,000 above your home's market value. Now, there is a chance that everything will work out fine and that one perfect buyer willing to pay any price will fall head over heels in love with your home. The more likely outcome is that the home will stay listed for a time and force you to re-evaluate the price you set, 30 to 45 days later. The market may catch up to the price you set originally before that happens, but that's pure speculation.
The Truth About Buyers and Home Pricing
A sobering reality for many would-be home sellers is that price is never the only determining factor for home buyers. Home buyers will always want to know how long a home has been on the market. Like it or not, a home that's remained on the market for a time carries with it a certain stigma. I mean why hasn't it sold already? There must be something wrong with it, right? Also, the price of a home doesn't exist in a vacuum. Once a home buyer has seen a home and decided they don't like it, it's unlikely that even a significant price reduction will change their minds.
Also, a price reduction can easily turn into a slippery slope leading to further price reductions. After 30 days on the market, it's unlikely you'll be the only home owner reducing your asking price. And as you reduce the price of your homes, others will likely do the same, continuing to price you out of the market. This scenario can quickly result in a harrowing race to the bottom, resulting in a lower final selling price than you would have received had you priced lower to begin with. Combined with expenses related to the purchase of a new home and your expenses have grown exponentially higher.
Is it Better to Price High or Price Low?
Let's compare outcomes. If you priced your home too low from the get-go, it likely sold very quickly. As a result, you were able to get on with your life. Sure, you may have gained a few thousand dollars had you priced more competitively but think about the additional carrying costs involved in a protracted sales period. While waiting for your home to sell, you've likely already carried on with the search for your next home. If you've found one you like, you may find yourself carrying two mortgages simultaneously.
To decide which option is right for you, you have to weigh your preferred outcomes. How fast do you want to sell? Are you willing to risk a protracted sales period for the chance of a greater end sales price? If you're looking to sell quickly, price your home 1-2% below market value. This will allow you to cushion yourself against market changes and likely allow you to get on with your life much quicker. If you sell at market value, expect an average sales period.
Lastly, overpricing your home is the big gamble. It's quite unlikely you'll find that one perfect buyer willing to pay any price; the more likely outcome is that you'll be forced to reduce the price of your home 30 to 45 days later, while the battling the stigma associated with a property that's been on the market for a while.
In the grand scheme, it's in everyone's best interest to price your home competitively from the get go! Save yourself the stress and price right the first time around.
Are you interested in buying or selling a Calgary home? We encourage you to contact the real estate professionals at Justin Havre & Associates online, or call 403-217-0003 today!