If you’re selling your home yourself, without a REALTOR® (commonly known as for sale by owner, or FSBO), you need to get familiar with pricing. Set your price too high and your home will sit on the market, unsold; set it too low and you’ll be leaving money on the table. So how do you set the right listing price for your home? This guide explains.
How to Set the Right Listing Price for Your Home
Every seller wants to bring in top dollar for their home, but here’s the bottom line: Your home is only worth what a buyer is willing to pay for it (and what a lender is willing to lend a buyer to pay for it). It’s absolutely essential that you price your home properly right out of the gate; if you price it incorrectly, you’re asking for trouble.
PPitfalls of Pricing a Home Too High
One of the most common mistakes FSBO sellers make is pricing their home too high. When you price a home too high, prospective buyers are going to compare it to other, similarly priced homes.
Here’s an example: Let’s say your home has four bedrooms, two bathrooms, a 1-acre yard with a fence, and a two-car garage. You list it for $500,000, which is high for the market you’re in (prices can vary greatly, even from neighborhood to neighborhood in the same city).
Prospective buyers are looking at all the $500,000 homes in the area. Most of them have five or more bedrooms, at least three bathrooms, wooded acreage and garages, as well as swimming pools, granite countertops and solid hardwood floors, and other amenities.
Your home is going to come up short when compared to those other $500,000 homes.
Things get worse from there. Eventually, you realize that your home is priced too high; maybe you haven’t even gotten a single offer (or if you did, it was $150,000 less than what you were asking). By then, though, your home’s listing has become “stale.” Newer listings have replaced it on home search websites, so many people aren’t even clicking through enough pages to find yours at all. Those who do find it are wondering what’s wrong with it because it’s been on the market for so long, and they focus their attention on “fresher” listings.
But if you had priced your home at $400,000, all the prospective buyers who came to see it may have jumped at the chance to put in an offer, because the other $400,000 homes are very similar to yours.
Pitfalls of Pricing a Home Too Low
The main pitfall of pricing a home too low is that you’re leaving money on the table.
Related: 3 common legal issues with selling a home FSBO in Maryland
How to Overcome Pricing Problems
When you work with a REALTOR, they come up with the best possible listing price for your home. They research and evaluate other, similar homes in the same area that have sold in the past few months, plus those that are currently on the market and those that were on the market but never sold. By running these side-by-side comparisons, REALTORs are able to determine how much buyers are paying for homes like yours every day.
If you’ve chosen to sell your home yourself, it may be in your best interest to at least talk to a real estate agent or a real estate attorney who can help you price it properly.
Related: 3 things you should never leave out during a home showing
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