The right price should attract buyers
Price is the No. 1 factor that helps homebuyers determine which homes they want to view, and it’s important to remember that the value of the home is determined by the market conditions, the buyer and the lenders appraiser if financing is involved. There is an art and a science to setting asking prices, and many sellers tend to overvalue their homes based on two common factors – the original cost of the property and the cost of home improvements.
- The original cost of the property does not determine your asking price. Price is determined by today’s market, not by the market in which you purchased your home. Buyers won’t be swayed to pay more for a property just because you paid more initially.
- Home improvements do not always increase your asking price. Improvements can add value to your home, but not all improvements add value equal to what you spent on them. What you consider an upgrade could be seen by a buyer as a potential future cost. For example, just because you spent $120,000 installing a state-of-the art swimming pool doesn’t mean your home’s selling price will be $120,000 more.
Again, the real value of the home is determined by what the market is willing to pay, and a buyer may value your addition at the cost you paid for it. This goes for all upgrades. A $70,000 kitchen upgrade doesn’t mean $70,000 should be added to the asking price. A $30,000 bathroom renovation doesn’t automatically add $30,000 to your home’s value. Consider this before spending money to upgrade or update any part of a home you plan to sell. While the original cost of the property and costs related to any home improvements shouldn’t affect your asking price, there are several things to take into consideration which will be discussed with Colleen Meyler when setting the price of your home.
Pricing will rely heavily on your personal situation and market conditions in your area at the time of the sale. Here are several factors that should affect your asking price:
- How quickly you need to sell. If time is your enemy because you’re relocating quickly (and especially if you already have a mortgage on a new home), your price will reflect the need to attract a good buyer fast.
- The amount of competition in your price category and area. Your asking price may be based on part by similar homes currently for sale. Square footage, layout, location can also all play a role.
- The availability, flexibility and affordability of financing. If your home is priced too high, potential buyers may struggle to get financing at that price. Financing also can be affected by local and national market conditions.
- The sale prices of similar homes sold in your area during the past six months. Like your current competition in the market, recent sales in the area will give an idea of how much your house is worth to potential buyers.