How to Properly Price A Home

Selling your home can be tricky. Learn how to properly price a home.

 

KEY TAKEAWAYS

• The most important thing you must do is correctly price your home for sale.
• Understand the psychology of pricing real estate.
• Learn how to determine the sales price range of your home.
• Find out how to attract buyers’ herd mentality.
• Learn how to get your price noticed on real estate searches;
• Avoid getting creative with your listing price.
• Create a pricing contingency plan with your Realtor.
• Pricing may fluctuate during your listing.
• Know how to deal with appraisers.
• Learn more about selling your home.

 

Properly Price Your Home When Listing

 

According to The Balance, the single most important thing you do when selling your home is correct pricing. Overpricing your home results in no sale. Listing for too low means loss of profit and less buying capital for your next home.

Lowering your price after listing for a long time shows buyers a weakness you can’t overcome. Stale listings remain unsold for long periods giving you and your home a bad reputation.

If you must lower your price later due to a change in market conditions, don’t do a too-little-too-late.  Read our informative post about “Home Sellers Strategies”.

Several factors go into pricing a home. Follow our tips to properly price your home. Do this before putting your home on the market.

 

The Psychology of Pricing Real Estate

Lots of psychology goes into determining a home’s asking price. Just like stores advertising sales prices for $4.99 instead of $5, trying to trick buyers into thinking it’s a better deal.

For example, reducing your home price from $600,000 to $599K saves your buyer $1,000. Yet, in your buyer’s mind, he or she is still paying $600K. Essentially, lowering your price by $1,000 won’t make a difference to the buyer.

 

Determine the Price Range

 

When you and your Realtor agree on an initial asking price it usually begins with what similar properties in your neighborhood comparable (Comps) show. Like showing $600,000.

Comps consider the similarity of houses based on:

• Location;
• Style;
• Square Footage (compare within a 10 percent variance up or down);
• Age (for instance, 1960s homes differ in construction from the 1980s) ;
• Number of Bed/Bathrooms; and
• Time Frame (most recent sales).

Next, you must understand the price range for a listing price. In our case, it could be between $580K to $620K. It depends on market conditions, time of year, competing properties, and inventory. Higher-priced homes like around $1 million might range from $950K to $1.05 million.

Market-dependent pricing requires setting a price comparable to the most recent sales of comparable homes.

Now that you determined your home’s value with a price range, it’s time to finalize the actual “list” price.

 

Create “Herd Mentality”

 

Psychologically, buyers don’t want to be the only ones interested in a home. Pricing your home on the lower end of the price range can stimulate interest from many buyers. This is known as “Herd Mentality”. Also, if you want to sell quickly, creating a herd mentality is a good option.

 

Make it Easy for Your Price to be Discovered in Real Estate Searches

 

Buyers usually tell their Realtor the maximum amount they want to pay for their ideal home. Based on this, the Realtor will set up an automated search for homes under that amount.

If your home is listed at $610K it will not appear for buyers seeking under $600K. This makes you miss out on potential qualified buyers.

To avoid this problem, smart Buyer’s Realtors include homes listed a little higher than $600K. Given that sellers set flexible listing prices, buyers’ Realtors know that a good match might be priced a little higher.

Tip: A listings database home search set a little over the buyer’s maximum amount may yield a perfect fit with room to negotiate a lower price.

 

Never Get “Creative” with Your Listing Price

 

Sometimes, sellers get greedy. A seller with a home valued between $575K and $625K may list it at $587,777. The purpose is to make a unique price stand out. However, this will only make buyers suspicious. What is wrong with this seller? Is this the debt he owes on the house? Nothing good comes from this.

Never bring the seller to the forefront of a sale. You don’t want buyers misjudging your intentions. In fact, Realtors try to keep the sellers invisible. This is why you are asked to hide your personal things before showings (like diplomas, photos, etc.).

Your Realtor’s goal is to showcase your home and not you. This will appeal to a wider audience. Quirky listing prices counteract the tried and tested neutrality of a home.

 

Come Up with a Pricing Contingency Plan Before Listing

You may have high expectations on how much your home appeals for top dollar. Or, another real estate agent convinced you your home is worth more than it is?

Before listing, consult with your Realtor about coming up with a pricing contingency plan.

 

Pricing Fluctuates During Discussions

 

Listen to what your Realtor advises as a pricing strategy. An experienced Realtor knows what works and doesn’t. Yet, strategies change under different circumstances. Expect ongoing pricing discussions with your Realtor if the home doesn’t sell quickly.

Home pricing is never a “set it and forget it” process. During the time you list your home circumstances may change. For instance, mortgage rates change, new listings flood the market, or other market conditions change.

If market changes occur you must be flexible and act fast to adjust your selling price with less aggravation.

 

Got Questions?

Know How to Deal with Appraisers

 

Buyers getting a mortgage will require an appraisal of your home. Appraisers work for the lender and focus on these parts of the home:

• Age;
• Square footage;
• Number of Bedrooms and baths;
• Lot size;
• Plumbing; and the
• Furnace.

If the appraiser’s final report is lower than your sales price, either you lower your price or the buyer can walk away and get the earnest money deposit back.

Tip: Avoid low appraisals by first hiring a professional home inspector to go over your entire home from top to bottom. Your inspector can identify hidden defects like structural or foundation problems and electrical, and plumbing. Also, make the repairs before selling your home.

Read our blog post “Home Inspection Process Explained”.

 

Learn More About Selling Your Home

 

Read our useful blog posts helping sellers such as:

• “The Home Selling Process”; 
• “How to Create Positive Home Buyers First Impressions”; and
• “6 Things to do If You’re Trying to Sell Your Home for More Money”.

 

How to Properly Price A Home – Conclusion

 

Now that you learned how to properly price a home, work with an experienced Realtor. Together, you can:

• Properly price your home when listing;
• Put the psychology of pricing real estate to work;
• Determine a proper price range;
• Create a herd mentality amongst buyers;
• Get your price noticed on real estate searches;
• Avoid getting creative with your price;
• Create a price contingency plan;
• Know that price fluctuates during the listing;
• Hire a professional home inspector; and
• Read our past posts to learn more about selling your home.

 

Want to Sell Your San Diego Home?

 

Big Block Realty introduces you to experienced Realtors who know your neighborhood throughout San Diego County.

Recently, we were voted the Best Real Estate Brokerage in San Diego. View screenshots and links to sources of our many awards in our blog post: “Best Real Estate Broker in San Diego 2022”.

Our unique RealScout program helps sellers in the greater San Diego area in many ways. Learn about them in our blog post: “How RealScout Helps San Diego Home Sellers”.

Contact us before you list your home for sale. Let one of our skilled Realtors help you with pricing, strategy, and marketing of your home to get the best price in San Diego County.

 

Steven Rich, MBA – Guest Blogger

 

 

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