Regardless of how good a product is, it won’t sell unless the price is right. If you make the price too high, you could unintentionally shun your target market. If you price it too low, a customer may believe that the product is flawed or not worth the money. This is true whether you are selling a set of dishware or selling a house. Let’s look at a few ways that you can get your pricing strategy right and price a home to sell quickly without undervaluing the asset.
Use Comparable Sales as a Product Pricing Strategy
In the free market, a product is worth whatever someone is willing to pay for it. Therefore, if you see that a three-bedroom house next to the one that you are trying to sell has just sold for $500,000, you can assume that the market is around $500,000 for your three-bedroom home as well.
However, if the home that you are trying to sell has just gotten a new roof or has a new kitchen, you might want to list it slightly higher to reflect those upgrades. Using this strategy can be effective because no one wants to pay too much for a house. In many cases, people will use the first price that they see for comparable houses as an anchor price.
As you go through your property management courses, you will see how big an effect that anchor pricing can have. If buyers see that other homes are selling for $500,000, they may believe that the homes are worth that much because they have no other point of reference to go on. Therefore, they may not want to pay more than that, which means you will have to stay close to or below that price to sell the home quickly.
End Your Price With A Nine
A common pricing strategy in business is to end a price with a nine. For instance, instead of pricing a home at $500,000, you could price the home at $499,999. This works because the brain assumes that the price is closer to $400,000 than $500,000 despite there being only a dollar difference between the two prices. Another pricing strategy example would be to price your home at $499,995 or $499,500 to get the same effect. Regardless of what you price your home for, make it an even number. If the price stands out too much, the buyer may give the home a look more out of curiosity than an intent to actually buy the house.
Who Has the Upper Hand in the Market?
If you are in a sellers market, asking for nothing more than fair market value for a house can result in several offers within a few hours or days of listing the home. In fact, a bidding war could ensue that could result in the home selling above listing price without sitting on the market for too long. If you are in a buyers market, you may want to consider extras such as including appliances already in the home, which could add value to the purchase price.
Offer a Discount Per Square Foot
In some cases, a real estate agent will decide to price a home per square foot. For instance, if a 1,000 square foot home sold for $100,000, you would be asking $100 per square foot. Depending on the size of the home and the average price per square foot for comparable sales, you may be able to ask more overall while still offering a discount based on the size of the home.
Know Your Target Market
Ideally, you will know what your target market is willing to spend and what their initial budgets are. If your target buyer will spend $100,000 for the type of home that you are selling, you should list the home for $100,000 even if it may be worth slightly more. This is because the home is more likely to appear in online search results or other queries involving homes for $100,000 or less. Again, you may be able to get multiple offers using this tactic, which may result in the home selling for its desired price even if you start low.
Get an Appraisal Before Selling the Home
As part of real estate training courses, you will learn that it is critical to know what your property is worth before attempting to sell it. Therefore, you should get an appraisal from a professional who has an intimate understanding of the local market. With an appraisal in hand, you can then set your target price at or below that figure. This works because you are allowing the buyer to break even or even gain equity in the home from the moment that they buy it.
Create a Herd Mentality
When selling a house, it is best if you have two or more offers on the property. This is because a buyer doesn’t feel as comfortable knowing that he or she is the only one putting in an offer on it. This is because that person may feel as if he or she may not know everything about the house or that it may have a fatal flaw that has kept others away from it.
That may be especially true if the house seems to be in good condition and in a nice neighborhood. In such a scenario, your goal is more about creating buzz than it is setting a particular price. Therefore, you should push the property and its potential to get people in the door and excited about placing an offer no matter what it may cost.
Even after you get your real estate certificate, there is a lot to learn about how to price homes to sell quickly. No two home sales are the same, and the market conditions will play a large role in determining whether or not an offer is made or accepted. By taking that and consumer psychology into account, you can create a strategy tailored to the sale itself and get a home off of the market as soon as possible.
Images: “Author’s Own”
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