There’s no exact science to determine how much your home is worth. Instead, what a buyer is willing to pay has been the gold standard, and the definition of the “value of a home,” since the Great Depression. In today’s extreme Seller’s market, there’s a right way and a wrong way to list your house. Misstep, and you might fall short of your ultimate financial potential. And how you price your home has everything to do with it.
A typical home Buyer knows your home’s general value based on other similar homes sold recently. However, that value isn’t set in stone, especially when factoring in competition and a Buyer’s fear of loss. When an intriguing, fairly priced home captures a buyer’s attention, some are more than willing to make a much higher offer in order to just win the bid.
This aggressive bidding is the new status quo for buyers in today’s extreme market. So it would be tempting to list your home at the top of your potential value range. However, when you do this, you risk alienating and intimidating your pool of buyers. If a Buyer feels a home is already priced blatantly at the top end of reason, anticipating having to pay an extra 5% to 10% above asking price just to beat the perceived competition is typically met with hesitation and indecision. For example, if a home’s value tops out around $500,000 on paper, pricing your home at $495k and MAKING a home buyer go to $520k just to beat the competition is going to receive less interest and lower offers than the same home priced $10,000 less. And pricing your home at the tippy top of your range can stifle a buyer’s desire to make an exception or even waive the appraisal contingency altogether.
Speaking of appraisals: even if an overpriced home does get a crazy accepted offer, you also have to factor in what an appraiser believes your home’s value to be. A pretty home in a wonderful community can garner a lot of attention from buyers under duress, but if an unbiased appraiser sees a home’s value differently than a home buyer head over heels in love- the whole deal can come crashing down. More often than not these days, appraisal deficiencies are killing deals. So ideally, what you as a seller are looking for, is receiving an offer from a buyer willing to pay a high price, while also paying consideration to the standard appraisal contingency.
Ultimately, pricing your home appropriately within its value range increases the likelihood of garnering competing offers, which raises the potential net value of offers while reducing the chance of a shortcoming in an appraisal. Instead of forcing the hand of buyers and risking appraisal complications, allowing the free market to set the new standard for home values in your range is the key to netting the most amount of money for your home.
Contact Ben Mullikin, Broker/Owner