Are you gearing up to list your home in a seller’s market? With much of the United States currently experiencing a seller’s market, there’s ample potential for substantial profits. You’re in luck! However, the question of how to set the right price can be a pivotal one for sellers. Some opt for ambitious pricing to maximize their gains, while others consider more conservative pricing to incite competitive bidding. Which pricing strategy suits your situation best? Each approach has its advantages and disadvantages, so let’s delve into determining the ideal one for you.
1. Start with a Comprehensive Assessment
Before setting your list price, it’s crucial to evaluate your local market conditions thoroughly. According to Seth Lejeune, a real estate agent with Berkshire Hathaway in Collegeville, PA, you should confirm that you’re genuinely in a seller’s market. Begin with a quick check on realtor.com’s Market Hotness Index, which highlights cities that are becoming hotter for home sellers. However, for a deeper understanding of your market, consider these key factors:
Average Days on Market (DOM): If houses in your neighborhood are selling in less than 10 days, it’s a strong seller’s market. You can find the average DOM for your city using realtor.com’s Local Market Trends tool.
Asking vs. Final Home Price: In seller’s markets, bidding wars can lead to final sales prices equal to or higher than the asking price. In a robust seller’s market, the final sales price is often at least 10% higher than the asking price. You can compare listing prices to closing prices in different cities at realtor.com/local.
Home Prices Over Time: A consistent rise in home prices over time is a clear indicator of a seller’s market. You can track whether home prices are on the upswing or downswing in your city by examining your ZIP code’s “market price curve” on BuilderOnline.com.
2. Pricing Strategy 1: List at Market Value
To determine your home’s “fair market value,” input your address on realtor.com/sell to obtain an initial estimate of its current market worth. For a more precise figure, review recent sales prices of comparable homes in your area. Seasoned real estate agents can help you consolidate this information into a justified and defendable asking price—a crucial factor when negotiations commence.
Lou Nimkoff, President of the Orlando Regional Realtor Association, emphasizes the importance of trusting your agent’s expertise in assessing market value. Regardless of market conditions, listing your home at market value is generally the wisest strategy. Lejeune advises sellers to disregard the noise and focus on selling within a reasonable timeframe. Listing at market value puts you in a favorable position to secure a full-price offer quickly.
If you’re not in a hurry to sell, read on for additional strategies.
3. Pricing Strategy 2: Aim High
If time isn’t of the essence, consider pricing your home slightly above market value—typically 5% to 10% higher—in hopes of enticing a generous offer. However, be aware of potential drawbacks. An excessively high list price can lead to your property languishing on the market, causing it to be viewed negatively by potential buyers, which could make selling even more challenging. Additionally, if the lender’s appraisal falls short of your high price, closing the sale may become problematic.
Dan Burz, an agent at Douglas Elliman in New York and New Jersey, suggests that some sellers succeed in obtaining offers above asking price by targeting cash-ready investors. Nevertheless, listing above market value carries the risk of not selling, especially if you are unwilling to reduce the price.
4. Pricing Strategy 3: List Below Market Value
To increase your property’s exposure and potentially spark a bidding war, you can set the list price below market value—usually 5% to 10% under market price. According to Nimkoff, this strategy often results in multiple offers within one to two days, which is a favorable scenario for sellers. However, managing multiple offers can be challenging, as each offer may have different contingencies and terms. Your choice of the best offer will depend on your priorities.
Keep in mind that this strategy may backfire if you receive only one offer at or below the asking price. While less likely in a seller’s market, it’s still a possibility. Additionally, there is limited room for negotiation if you receive a lowball offer.
In conclusion, pricing your home in a seller’s market requires a careful assessment of your local conditions and a strategic approach. Whether you decide to list at market value, aim high, or list below market value, understanding the advantages and disadvantages of each strategy is crucial to achieving a successful sale. Trusting the expertise of your real estate agent can also play a pivotal role in making the right pricing decision for your unique situation.
