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2. Set a fair asking price

 

How do i set the asking price of my property

For how much should you list your property? If it’s too high, it will discourage buyers who might have been interested. Too low, and you’ll lose out on thousands of dollars from the sale. How do you set the asking price of your property?

  1. Do not inflate the asking price
  2. Price realistically according to the market
  3. Add a (small) margin for negotiation
  4. Still not sure? Have a pre-inspection before putting your home on the market
  5. Set a bottom-line price for negotiations

 

1. Do not inflate the asking price

You might be tempted to ask for a higher price than the real market value of your home. After all, it’s the best way to obtain the best price, right?

Wrong. It’s bad strategy. Here’s why:

The vast majority of buyers have a budget (that’s actually our initial advice to buyers: determine a realistic budget ). Next, they look at all properties available within their price range and eliminate those not meeting their criteria. Then they visit the selected properties, hoping to find the one they’ll fall in love with.

If you inflate the price of your home, you are competing with other properties that are actually worth more than yours. Buyers who visit your property will compare it with other, better-value properties they’ve visited. They will be disappointed and won’t make an offer.

It’s also possible they won’t even visit your property. Just by viewing your listing, they may find your home to be less appealing than others at the same price.

By overpricing your property, you won’t be able to negotiate with interested buyers. You also won’t be able to say to buyers, “Yes, we’d be willing to lower our price a bit”.

Months will pass and your home will still be for sale. After several months, you may be discouraged and end up lowering your price, to what you should have offered right from the start.

Even by lowering your price to reflect the market, you will still be disappointed. Potential buyers will have already excluded your property, even if they agree on the new price.

Also, seeing that your property has been on the market for months, agents will assume that you’re hiding a major defect not indicated in your listing. Not wanting to waste their time, they won’t visit your home with their clients.

That’s why you shouldn’t overprice your property.

 

2. Price realistically according to the market

Potential buyers are aware of market prices. Most have already visited other properties and will visit more after yours.

You should also compare your property with others on the market. Many sellers attend open houses to get a better idea of how to price their home.

Compare your property with two others, noting their advantages and weaknesses. Does one have more land? Will their buyers need to renovate? What are the neighbourhoods like?

As a rule of thumb, every dollar put into renovations increases a property’s value by no more than 50 cents, depending on the type and the quality of the work done. A patio and a hot-tub for $20,000 will only increase your home’s value by $10,000 and only if done recently and impeccably. If the work is dated, then it’s worth $5,000 or less.

Extravagant renovations can actually add very little value to a property. A modest buyer does not want to pay more for a state-of-the-art wine cellar.

  • Here is how to decide on a price that appeals to buyers:
    • Look at how similar properties are priced (same criteria, neighbourhood or area).
    • Attend a few open houses, if you can
    • Compare strong and weak points
    • Make sure your asking price is competitive
    • Sign up for email alerts that inform you about new properties on the market, price changes and open houses in your neighbourhood or area.

 

3. Add a (small) margin for negotiation

Let’s say you’ve compared your home with several others in your neighbourhood, and you’ve decided your property’s market value is $400,000. Add a small margin for negotiation by increasing the price by 3 or 4 per cent. Your listing price will thus be $415,000.

Let’s say you’ve compared your home with several others in your neighbourhood, and you’ve decided your property’s market value is $400,000. Add a small margin for negotiation by increasing the price by 3 or 4 per cent. Your listing price will thus be $415,000.

Proper pricing will get you more offers, much faster.

You might even receive several offers at once. This is the ideal situation: By putting buyers in competition with each other, you will be in a bargaining position. Some buyers will even make a better offer with better conditions!

  • Add a small margin for negotiation. We recommend adding 3 or 4 per cent, never more than 5 per cent.

 

4. Still not sure? Have a pre-inspection before putting your home on the market

Your home might have defects that are either ignored, or you don’t realize their impact. Examples of defects include an overly humid basement and a leaky roof.

Interested buyers will request an inspection of your home before finalizing their purchase. This is totally normal. And buyers’ inspectors almost always find defects. If major repairs are needed, then buyers will ask for a lower price or even cancel their offer. These problems won’t just disappear, so you better attend to them.

Some defects can be fixed with simple solutions, like installing a de-humidifier in a humid basement, whereas other defects, such as water infiltration, are costly to repair. In this situation, it is best to get a good contractor to provide an estimate on repair costs. This estimate will come in handy during negotiations, as you will have proof of the real cost of the work to be done.

If your property has a major defect, your need to factor it into your asking price.

It’s also wise to hire your own inspector or contractor to find and assess any defects. And what if your inspector doesn’t find any major problems? Then this will only increase your property’s value!

 

5. Set a bottom-line price for negotiations

Interested buyers will want to negotiate the price. It’s normal to receive offers that are less than your asking price.

Should you accept an offer that’s $5,000 less? What about $20,000? The answer depends on different factors. Are you in a rush to sell your property? Are many buyers interested at the price you listed?

Here’s a piece of advice that will reduce your stress: Determine the lowest offer you would accept for your home, but don’t tell buyers. Knowing your bottom line will make it easier and faster for you to decide on an offer.

Want more advice? Contact a Eureka.House real-estate coach

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