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Home Selling

How to Price Your Home


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How do I pick the list price?

This is a question we hear a lot. First, let's get the elephant out of the room. Sellers do not determine the sale price of a home, buyers do. What sellers can do is adopt a strategy so you can find the buyer who values your home the most. The sellers may decide not to sell the home, but they can’t directly determine the purchase price of the home.

List price is not necessarily the price at which your home will sell. List price is a part of your overall sales strategy. Having an incorrect list price and not correcting it is one of the biggest reasons people fail to sell their homes. 

The trouble is, most sellers have an inflated value of their home price. This happens because people have a variety of data-points available to them related to comparable sales. When it’s time to sell, they remember the homes that sold for the highest prices.

Remember, the sale price is going to be determined by the market. Nobody can predict the market - whether it is the housing market, stock market or bond market. If you could predict the market, you'd make billions! 

How to Determine Your Home’s List Price

Now given that nobody can predict the market, how do you determine the list price? The list price and the sale price are often two separate numbers. The list price is your advertisement. The sale price is the market value of your home. 

Your home pricing goal: maximize the sale price. 

If you need help pricing your home, Faira can help: We will provide you with a CMA (Comparative Market Analysis) to help you price your home. Just start your listing (no obligation) and request a free home report. 

Get a free home report

Faira is free for sellers -  there is no commission - and  we provide everything you need to successfully sell your home at the maximum price. Our new process empowers sellers with modern technology and gives buyers transparency upfront so they can make informed, confident offers. 

Home Pricing Strategy #1: Underprice Your Home

The market can give you quick feedback if you have an underpriced home. If your home is perceived by a buyer as a $500,000 home and you list it at $450,000, then buyers are likely to compete against each other and escalate the price. In fact, this is one strategy: try to underprice your home and let the competition among buyers take care of it. If you do this, buyers often offer the maximum to beat the competition!

Faira makes it very easy for buyers to compete against each other and offer you the maximum value. On Faira, buyers submit offers online so all buyers know where they stand in the offer process. Here's an example from a recently sold home:

Faira transparent offers example

In this example, the seller listed his condo in lower the Queen Anne neighborhood of Seattle with Faira. He set an offer review date and most offers came in within 24 hours.

How to Read the Market

Now what if you aren't getting any offers after the first weekend? Despite your attempt to underprice the home, it is still possible that you overpriced it. The market does not have any quick way to give you this feedback. But after a few weekends, it is time to read the market:

  • Have you had much traffic from buyers?
  • If there were some visits, did the buyers call you with questions? 
  • Did you receive any offers? 

Typically, if 2 or 3 weekends have gone by with no offers, you are not likely to sell above the list price. If 4 or more weekends have gone by, you are not likely to sell at the list price itself. It is time to change your strategy.

Fear of Listing Lower

Now many people have a fear of listing lower, thinking they will have to sell at a low price. At Faira, we have seen the opposite. Sellers who list lower, get more interest, which generates competition and a higher sale price. Also, we should note that Faira does not require you to sell. If you list a home on Faira and you do not get your desired price, you have no obligation to sell your home. 

Buyer Mentality

When you price lower and there is compeition the mentality of the buyer is "How high can I go" to win the home. On the other hand, if you are not getting any offers and you make small price cuts, the buyer mentality is "How low can I go" to get the home. Which brings us to the next home pricing strategy, in cases where your initial list price was too high and you need to decrease the price to generate interest. 

Home Pricing Strategy #2: Cut the Price

When it’s time to do a price cut on your home, it is better to do a substantial price cut rather than a minor price cut. If the buyers had thought you were just a tad bit over priced, they would have made an offer. If you did not get any interesting offers, the chances are that the buyers think you are way overpriced. Your goal is to reach a price point at which you can cause competition among the buyers. So a substantial price cut, say on a Thursday, and a new offer review date of Tuesday might be a balanced strategy. If your cut was determined to be too deep by the market, then you might have some competition among the buyers, which will correct the price.

A slow and frequent price cut can waste a lot of time and give buyers the impression that they can get your home even cheaper. By making a deep price cut, you can get multiple buyers interested creating a sense of urgency to act so they don't "miss out" on your home. 

Repeat the above process, until the home sells or you decide not to sell. As a seller, you don't get to choose the sale price, the market gets to decide. You do get to decide whether you want to sell at the market price or not. If you have reached your own lowest price and there is still no interest from buyers, it is very likely that you value your home more than any buyer out there. In this case, you should keep it.

If you're ready to sell, start with Faira. We take care of everything you need to get your home on the market at zero cost. Learn more about selling your home with Faira. It's free! 

 

Kamal Jain

Written by Kamal Jain

Kamal is the CEO and Co-Founder of Faira.com. A technologist and economist, Kamal specializes in designing business models for the internet, which he did for both Microsoft and eBay. Kamal now wants to align the interests of home buyers and home sellers with Faira.

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