Landing on the right price point, though simple in theory, is a complex endeavor. It is not enough to simply throw a number out there and hope buyers will like what they see. If for nothing else, neglecting your due diligence is a sure-fire way to hurt the home’s chances of selling in a timely and profitable manner.
Instead, do your homework and land on a price point that is conducive to the sale of the property. Above all else, use these three strategies to increase your chances of receiving an offer everyone can be happy with:
1. Emotions don’t have a say
Whether you want to accept it or not, prospective buyers will never care what a home looked like prior to seeing it in its current state; the only thing that matters is the final product.
That said, you should never price a home based on how much work was put into it — or any emotional connections for that matter.
Sellers shouldn’t expect anyone to pay for the renovations it took to bring the property up to market standards. Sellers owe it to buyers to provide a product that is comparable to, well, the “comparables.”
Don’t attempt to incorporate any “feelings” into your price point, as it might illicit a false sense of appreciation; one that can’t be verified by anything else other than the seller’s emotional connection with the property in question.
You can’t put a price on the emotional connection sellers have with a property, nor can they expect a third-party buyer to pay for something that is more or less trivial to their purchase.
The key is to use a tangible and objective approach that draws from actual market data. Square footage and comparables, for that matter, are just a few of the hard facts to base your price point off of.
Take note of what similar houses in the area have sold for, preferably within a quarter-mile radius, and use them as a reference for your own home.
It is important to note, however, that today’s buyers are smarter and more informed than ever before. If they are looking at a home, there is a good chance they already know how much it should sell for.
With access to home prices no more than a click away on the internet, it is safer to assume they have already done their homework than to try and nickel and dime them.
Any attempt to squeeze their pocket book more than the current housing environment already is will be met with hesitation, and the potential for the home to sit idle on the market will increase.
Although there is a good chance the home you intend to sell is brimming with intangibles, do not let the sellers’ affection for a property cloud what is otherwise a sizable business transaction.
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2. Price it low for a higher profit
The U.S. housing market has come a long way since the worst point of the recession. Home prices have increased almost exponentially, and equity has returned to places otherwise void of it for nearly a decade.
However, there is still one prominent indicator that is hampering today’s housing market: inventory.
According to MarketWatch, the supply of U.S. homes for sale has nearly dropped to its lowest level since before the Great Recession.
“Inventory dropped nearly 1 percent from May to about 2.14 million homes, a supply of about 4.6 months, compared with a typical supply of six months in a healthy market,” according to the report.
It is important to note that demand remains encouraging; people really want to buy homes, they just need a larger pool to choose from. There is a healthy amount of competition in today’s market, which means sellers need to carefully consider the point in which they intend to price their home.
In fact, you could very easily argue that lowballing your initial price point could result in a larger profit.
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Offering a lower price to make more money sounds counterintuitive, which begs the question: how can a lower price point result in higher profits?
It might be a lot more beneficial for today’s sellers to price their homes at a lower point, as to generate more interest. If for nothing else, greater interest in a property is more likely to initiate a bidding war.
In the event you can attract more than one interested party, you stand to benefit from competition that is more than likely to increase your asking price.
3. Treat every offer like it’s the only one
The perfect price point ultimately comes down to the middle-ground each party is willing to accept. If for nothing else, a transaction will never take place unless both sides can agree on a number.
The best price point is one that makes both sides happy, and it might not be where you initially intended it to be. The key is to negotiate in a manner that facilitates a transaction, so get ready to make some concessions in your search for the perfect price.
By concessions, I am, of course, referring to negotiations. Don’t simply give in to buyers, but rather negotiate a deal that both people can be happy about. Remember, negotiations are just as important to pricing as the initial number the home was listed at.
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Please remember, however, that not every buyer is created equal. Some will have their own negotiating strategy; for as unique as they might be, it is in your best interest to treat every offer with the utmost respect.
Don’t let a lowball offer throw you off, as the first offering is typically a starting point for most buyers; they are simply throwing a number out and seeing if it sticks.
The worst thing a seller can do in this situation is ignore those buyers who come in at a low price. If for nothing else, treat the initial offer as a starting point, and work from there.
Remember, any attempt to counter an offer should be met with the corresponding data that substantiates your claim. Don’t simply counter for the sake of countering; you have to be able to justify your price point. Feel free to show the buyer comparables in the area that back up your claim.
If you still aren’t able to land on a price that you are comfortable departing with, I recommend implementing a contingency plan. If the buyer isn’t willing to increase their offer, there is a good chance the right incentive could change their mind.
Sellers have a lot of power in their corner in this market, and price points aren’t the only things they can negotiate. If you want to maintain a higher asking price, offer buyers a faster closing window or a similar contingency they find appealing.
If you award them the opportunity to move in faster, they might be willing to pay a little more. At the very least, you stand to make up ground that might not have been covered in the negotiations.
Do your best to find out what is important to them, and offer it; you might be surprised at what they are willing to concede.
Pricing a home well has become synonymous with many moving parts; all of which need to come together perfectly. However, there are a few strategies you can implement to increase your chances of selling in a timely and profitable fashion.
Do yourself a favor, and try these three pricing strategies the next time you sell a home.
Than Merrill is the founder and CEO of FortuneBuilders and CT Homes. Connect with Than on LinkedIn or follow him on Twitter @ThanMerrill.
