Pricing your Property – As REALTORS we often hear sellers say they “need” or “want” a certain price for their property, and then base their decision on what price to list for on this. Unfortunately, the “needs” and “wants” of the seller have nothing to do with the market value of the property. While your “needs” and “wants” may be the determining factor on whether you want to, or able to sell your property, they will not impact the selling price in any way.
The market value of your property is determined by simple economics. When demand is high and supply is low (Seller’s Market), prices trend upwards. The opposite holds true in that when demand is low and supply is high (Buyer’s Market), prices trend downwards. The Buyer does not care how much you “need” or “want” for the property, they only care about getting the best value for their dollar. Similarly, the banks also don’t care about what the seller “needs” or “wants” for the property, and will only lend money based on an appraised value.
Another common misconception is that REALTORS or Real Estate Brokerages are somehow able to manipulate the market value of a property. This is simply not true; the market value of the property is determined by simple economics. REALTORS don’t attract offers to your property, the property and its perceived market value does. Simply put, your property is only worth what a Buyer is willing to pay for it, in the current state of the marketplace.
The number one mistake sellers make when listing their property is pricing it above what the market is telling us it is worth. When a Seller does this, the following scenario usually takes place:
First off, the home will sit on the market and will not attract any showings, much less offers, or the property will get a few showings, but still no offers. When this happens, the Seller will typically place the blame on the Seller’s Agent, as they perceive that their agent is not doing their job, but if you remember from above, it’s not the REALTORS that attract the offer, it’s the property and it’s perceived market value that does.
At this stage the Seller will often consent to a price reduction, and provided the price is in line with market value. The home will typically sell. If the price reduction isn’t in line with the market value, the home will continue to sit on the market, creating a stigma to the property (people will begin to wonder, what is wrong with that property). This will further erode its value. More often than not, the eventual selling price of a home that was incorrectly priced from the onset will be lower than the market value that was determined at the very beginning (especially when you consider the cost of carrying that property for a period of time).
With that said, you might be wondering just how you correctly price your property. Since you selected our 2% Fixed Rate Full Service package, we will be completing a CMA (comparative market analysis) for you to help determine your asking price. This report will give you a range of value, and is an excellent place to start in determining the market value of your property.
Another option you have to determine the market value for your property is to hire a professional appraiser. The cost of doing so is usually several hundred dollars and will give you a report that is more detailed than the Comparative Market Analysis that we as REALTORS would do for you. Generally speaking, most property owners don’t go this route to establish a market value for their property, however, most financial institutions will require an appraisal of the property in order to supply financing for the buyer (buyer’s expense). As most property buyers will require some form of financing in order to purchase your property, you should be conscious of the fact that if the price you have been offered for the property isn’t in line with the market value of the property, your deal could collapse on the “financing condition”. Just another reason to price your property correctly from the onset.