Google has a word for an ambitious project – they call it a “moon-shot”. Owners who are about to put their home on the market will often unknowingly copy this approach when setting their reserve for their auction, or asking price.
“Let’s test the market,” they declare. It is code for saying they want to ask too much and see if anyone is crazy enough to bite.
Unfortunately, the aim is not to find crazy people, but to get your property sold for the best price in a prompt period – and this is not the way to do it.
In many markets, the best way to find the maximum value for your home is at auction. This is where competition and emotion can sometimes get the better of buyers.
However, today’s buyers are conducting more research than ever, using property data research sites and the resources of their lenders. This means few buyers will walk through your home without a sense of its value.
As an experienced real estate agent in the area, I often get asked more questions relating to price guidance and buyer interest than about the property’s features and benefits. That’s because they’re trying to capture the mood of the market to validate or recalibrate their assessment.
If you price your property beyond the market norm or recent price curve, you’ll likely miss your target buyer, and the house will sit on the market unwanted for months.
So if you’re preparing for a sale, careful consideration needs to be given to pitching a fair price or auction reserve so it will meet the market expectation and allow you to move onto the next exciting stage of your life. Below are some tips to help you consider your pricing options.
- Buyers are increasingly well informed and will recognise any overpriced property.
- Testing the market works well when marketing soap, but not real estate. With soap, you can change the product, pricing and packaging before a full launch. With your home, you have once crack at the market – you don’t want to mess it up.
- Buyers are suspicious of homes that languish on the market for more than six weeks. They think there’s something wrong or the owner is asking too much. So, they will reject it sight unseen.
- You’re going to spend several thousand dollars preparing your home and then additional money on a marketing campaign. That’s wasted cash if you insist on an unrealistic price.
- Even if you do find a buyer . . . Banks will appraise the value of your home before giving them a mortgage. If they believe their customer – your buyer – is about to over-pay, they’ll refuse the loan. You’ll be back at square-one.
- Over-playing your price makes you vulnerable to unscrupulous agents who will tell you what you want to hear to win the listing and then spend the remainder of the time trying to negotiate you down. Instead, look for an agent who will be honest and realistic with you from the start and work hard to get you the best price.