Pricing your home correctly is the most important thing you can do when selling your home. While underpricing is not usually a problem, overpricing your home is a real danger with many consequences. Overpricing will cause you to lose the freshness of your home's appeal during the first few weeks on the market. After three weeks, interest will wane, and your home will get a stigma. When you do get interested parties, they will lowball you, and you'll be left chasing the market by re-pricing your home.
Pricing your home can be tricky, but it's something that must be approached with realism. You can't afford to use your emotions and attachment to the home to price your home. What you paid is not relevant, nor is the price you've put into remodels and updates; the value of your home is what a buyer is willing to pay.
Research and legwork is what you need to determine the right price, but remember that pricing isn't an exact science; it is equal parts science, art and market conditions.
These strategies can help you select the right price for your home that will get it sold as fast as possible.
Comparable market analysis involves looking at every similar home that was or is listed in your neighborhood over the last six months. Similar properties have similar square footage that goes up or down 10% either way, and are of similar ages. Some neighborhoods will have recent homes next to homes built in the 1960's, and values between the two can differ greatly.
Comparative market analysis also requires looking at homes that were on the market but didn't sell. Look for patterns as to why these properties failed to sell and anything they share in common.
Remember that the homes on the market now are your competition. If you want to price your home higher, then it must be warranted. When you look at active listings, ask yourself what a buyer may prefer about that home over yours, and vice versa, to adjust your price.
Using the average price per square foot for comparable homes in your neighborhood can also be a good tool to use. You can usually see the price per square foot displayed in real estate listings for your area.
Current market conditions in your area play a big role in your pricing strategy. After you collect data about comparable homes, you need to look at the data based on market conditions.
Let's say your neighborhood comparables are listed at $150,000: In a buyer's market, you may need to price your home at $149,900 to settle at $145,000. In a seller's market, there's less inventory and greater demand. In this scenario, you could add 10% to the last comparable sale to stay ahead of the market. That same $150,000 home can be sold at $165,000. Finally, in a neutral market, you may want to set your price at the last comparable sale and then adjust based on trends. If the last sale was 3 months ago and median prices have moved up 1% a month, a price of $154,500 would be appropriate.