How Sellers Price Their Homes
Posted by The Atlantic Real Estate Team on Monday, April 19th, 2010 at 2:53pm.We're often asked by our clients, "How much under the listing price should we offer?" This is an excellent question. The answer is complex.
The main reason we emphasize the education phase of looking at homes is because that is the best way for you to know value. When you review and study 40-60 (or more) listings, then drive by 10-20 and look at 5-10, you will recognize the "Hot Listings". You'll also recognize the "Dogs".
Sellers price their homes differently for 4 basic reasons:
1. Ridiculously Overpriced
These sellers have not done their homework to know what the current market is. Sometimes sellers can't list lower due to what they owe on the home. Or, they have listened to a real estate agent overinflate the value of their home in an effort to obtain their listing. There is a natural tendency on the part of sellers to list with the real estate agent who tells them their home is worth the most.
2. A Little Overpriced
These sellers fall into two categories:
- Those that feel their home is worth every penny of their asking price
- Those that want to leave a little "negotiating room"
These homes can be 4-10% overpriced. Perhaps 75% of all homes for sale are priced in this range.
3. Priced at Fair Market Value
These sellers have carefully and realistically studied other homes for sale. They have priced their home very competitively. These homes usually sell relatively quickly at or near asking price.
4. Priced Below Fair Market Value
These homes are priced to give a potential buyer a "good deal". Perhaps the seller wants a fast sale. Perhaps the real estate agent recommended too low of a price. These homes typically sell very quickly. There are often competing offers and the home could sell for at or above asking price.
How Do I Know If I'm Overpaying For My Home?
Our job is to advise and assist you and ensure you have the tools and information you need to make an informed decision. We'll help you prepare your offer to purchase. Then we'll present it to the seller on your behalf and aggressively negotiate to get the offer accepted at your price and terms!
Lender Protection
Even by carefully studying homes for sale, it's difficult to establish Fair Market Value. If you're obtaining a home loan, you'll be protected by a professional lender appraisal. Home lenders want to make sure that you don't overpay for your home since they are lending you the money to purchase it. If the home does not meet value in the eyes of the appraiser, you'll be informed right away, and at that time we can re-negotiate the sales price or void the agreement and get a refund of your earnest money deposit.
If you have any questions, please feel free to contact us!
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