Price Your Home to Sell!

by J. Tar

Pricing a home above the market can be a big mistake. To understand why, consider the following true story.

The owners of a 3,000 square-foot Colonial home in Huntington, N.Y., recently decided to put their house on the market, without a real-estate agent, for $899,000. When a potential buyer offered $825,000, they refused to sell.

A month later, with no takers, the sellers decided to hire a real-estate agent to list the home. With some quick research, the agent determined that the house should be listed at $799,000, in part because there was another house nearby that had been sitting on the market for a long time at an even lower price, $760,000.

After some negotiating, the sellers finally agreed to list their property for $849,00, but after several more weeks, there were still no takers. They agreed to drop the price further to $799,000.

Not long afterwards, the owners found a taker -- the same buyer who offered $825,000 two months earlier. But this time, the buyer agreed to pay just $775,000 -- a full $50,000 less than they had originally offered!

The moral? Don't ask too much for your home. Buyers aren't stupid, and they have more tools than ever to gather market information, including a slew of home-listings web sites that allow them to research the marketplace with a click of the mouse.

When the price for a property is incorrectly set, it will sit on the market, with no bids. A home that sits on the market for a long time, or has its price reduced significantly and repeatedly, can often appear undesirable. You don't want the buyers to leave your property wondering why the house couldn't attract any interest, a possible sign that something was wrong with the house.

If you ask a more reasonable price, on the other hand, you're much more likely to draw interest from more than one buyer, a situation that always favors the seller. With competitors in the picture, buyers will be more willing to overlook dings or problems that appear in the inspection process, and they might even be willing to bid up the price of property.

All of this leads to a key question: How do you set the right price, anyway?

One good way is simply to rely on real-estate agents. There a lot of good reasons to go with a real-estate agent when selling your home. For one, they're not likely to talk you into asking too little; after all, their commissions are tied to the final sales price, so they have every incentive to sell your home for the highest possible figure.

Typically, a real-estate agent will perform a "comparable market analysis," (CMA) in which the agent looks at recent sales prices of similar homes in the neighborhood to get a feel for what the market will bear. Agents also can bring other knowledge to the table, including a sense of how many similar properties are listed on the market. If there are lots of comparable homes available in your area, they might advise you to lower your price a bit to make the home more competitive -- and again to get more bidders.

Of course, you don't have to go through a real-estate agent to calculate a fair-market price. But if you don't, it's wise to do some homework. Some web sites, including forsalebyowner.com and domania.com, allow sellers to pull up sales prices of nearby properties, though it's sometimes difficult to obtain certain details about the homes, like the number of bedrooms or square footage.

It's also possible to get your house appraised yourself. Electronicappraiser.com will provide an "automated" valuation of your home using information culled from electronic databases, often for about $30.

We believe it's more accurate to have an appraiser actually visit your house, but that can cost between $200 and $500 and take several days -- or weeks -- to complete. The cost of this type of appraisal can easily be recovered in the benefits that setting an accurate sale price for home will bring -- and it actually can be used as a sales tool.

No matter what you do, however, make sure that you base your sales price on some real information about the marketplace, and make sure it's in line with what the market will bear. If you don't, selling your home could turn into a much bigger headache.

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