Is Your Home Priced to Sell? Pros & Cons of Home Pricing Strategies

How to Price Your Home to Sell FastHow do you sell your home for the most money as fast as possible? It usually starts with price—but it might not be the way you’re thinking. Attracting buyers, one of the vital steps to home selling, isn’t as simple as pricing low, and getting the most money isn’t as simple as pricing high. Pricing right in the middle isn’t always the best strategy, either.

Let's unravel the nuances of real estate pricing strategies and pave the way for your home's successful journey to the closing table.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

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How Home Value is Determined

You're the one setting the price of your home—with the help of your real estate agent's expertise, of course—but the value of your home is determined by the buyer. It doesn't matter what price you put on your home if a buyer isn't willing to pay it.

It can be a hard pill to swallow, especially in a competitive market, but it's important to keep emotion out of your pricing strategy. It can cloud your judgment, and you may overprice your home, driving away the buyers you're trying to attract.

Factors That Affect Price

Things to think about when determining an asking price include:

  • Timing. Is there any urgency to selling your property? If you're under pressure to sell, you may have to compromise on a lower target price.
  • Selection. What type of competition is there in your community? Are there are lot of listings or only a few? Keep in mind that the number of listings doesn't necessarily determine whether you're in a buyer's or seller's market; that's the buyer demand for homes in your area compared to the number of listings.
  • Market analysis. A study of what homes in your area sold for in the last three to six months will give you a realistic picture of what similar properties went for. We offer a free market analysis to help you learn what your Calgary property is worth.
  • Home size and usable space. Square footage matters, and so does whether your basement is finished or unfinished. Garages aren't valuable living space; bedrooms and bathrooms are. This is also why it's a bad idea to turn a bedroom into something else before listing—the number of bedrooms is a common filter buyers use when looking for homes.
  • Age and condition. These generally go hand-in-hand since wear accumulates over the years, and the National Building Code is updated over time. Newer features like plumbing and roofing are more likely to be code-compliant and less likely to break down in the near future. A home that requires no repairs and is move-in-ready is highly prized for convenience.

Factors That Don't Affect Price

Things you need to let go of when you're setting a value on your home include:

  • How much you paid for your home. Your original cost is irrelevant to the buyer.
  • How much money you need to receive from the sale. Buyers won't be willing to pay extra to finance your move to a higher-priced home. If you're selling due to financial distress, you may garner some sympathy points, but don't count on it; this is the biggest purchase most buyers make in their lives.
  • The replacement cost of your home, which you may have kept in the back of your mind for insurance purposes. It doesn't matter what the price tag is if you built your home from the ground up today; what matters is the home that exists now.
  • Your attachment to your home. Buyers make an offer based on how they feel, not on how you feel.
  • Your out-of-pocket expenses in the sale transaction. As much as you'd like to add in property tax reconciliation, lawyer's fees, and commission, you can't make the buyer pay them by building them into your price. They can be taken out of the proceeds to simplify matters, however.
  • What your neighbour has to say. They may have anecdotal information about what other homes in the neighbourhood are worth, but take their advice about what fair market value might be with a grain of salt.

Factors That May or May Not Affect Price

  • Improvements you have made. Yes, buyers almost always prefer updated kitchens and bathrooms. If you're doing research-backed home improvements with high ROI, it may be a good idea. However, a high-end kitchen won't guarantee you a faster sale, nor is it guaranteed to make you your money back in profit. Over-renovating when you're preparing to sell is a frequent home seller mistake.
  • Location, depending on what part of your location you're valuing. Being near a school, shopping center, public transit, or concentration of employers is almost always a plus to your home's value. Being near something convenient to you, like a dog park or a specific employer, will only add value if your potential buyer has the same priorities. You'll also have to consider your home's proximity to things like highways or airports, which can be a benefit for convenience but a drawback for noise.

Price Below Market Value

Should You Underprice Your Home to Sell Fast?

In situations where demand is high and supply is low, pricing your property below market value can attract more potential buyers and create a competitive environment. Sparking a bidding war can potentially net you far above your asking price.

However, this strategy could result in lost profits if the best offer doesn't match your home's fair market value or meet your desired sale price. 

Carefully weigh the pros and cons before deciding on this pricing approach.

Pros of Underpricing

Pricing below market value in real estate can spark heightened interest and potentially ignite a competitive bidding atmosphere among buyers. Setting a price lower than comparable properties attracts more attention and increases the likelihood of multiple offers. This strategy often leads to a quicker sale and can result in a higher final sale price due to the competitive nature of the bidding process.

Additionally, it may appeal to buyers looking for a deal or those seeking to secure a property in a desirable location. Keep in mind that working closely with a knowledgeable real estate agent is essential to navigate the complexities of pricing below market value and maximizing the benefits it can offer.

Cons of Underpricing

While pricing below market value can create excitement and stimulate competitive offers, if you're not already in a hot market, there's a significant risk of not receiving bids soon after listing. This may result in a longer selling process, increased risk of lost profit, and increased home selling stress.

Additionally, setting a price below market value may attract opportunistic buyers looking for a steal, leading to false hope and potential conflicts during negotiations.

Buyers are also expecting you to seek out the best possible price you can get for your property. If you significantly underprice your home without an obvious reason, buyers will be asking themselves, "What's wrong with it?"

It's crucial to carefully assess the market conditions and consult a knowledgeable real estate agent to determine if pricing below market value is the right strategy for your home sale.

Price Above Market Value

Why You Should Never Overprice Your Home

When pricing your property above market value, you risk turning away potential buyers who may find the price unappealing. This strategy could lead to a longer listing period and fewer offers, impacting your ability to sell quickly and at a satisfactory price.

On the other hand, you could get lucky with the perfect buyer and walk away with more money.

It's essential to carefully weigh the pros and cons of pricing above market value to make an informed decision that aligns with your selling goals.

Pros of Overpricing

The most apparent benefit is that you get more money if you successfully sell your home at a higher asking price. However, properties with inflated prices often linger on the market, leading to decreased interest and potentially lower final sale prices. A longer selling process can also increase the cost of selling a home by forcing sellers' hands regarding making repairs and increasing marketing.

Sellers may opt for this approach out of optimism or as a strategic move. Still, it's crucial to consider the potential drawbacks, such as extended market time and reduced buyer interest.

By pricing your property above market value, potential buyers who dislike negotiating may be deterred from making offers. This strategy could appeal to sellers seeking to test the market or capitalize on ambitious pricing, but it's a double-edged sword.

While aiming high can be tempting, weighing the benefits against the risks is essential. It's advisable to consult with a real estate professional to determine the most effective pricing strategy for your specific situation.

Cons of Overpricing

If you list your property above market value, you risk deterring potential buyers who prefer straightforward transactions. While you can theoretically adjust your asking price later, it's not a good idea.

Let's say you want to start high with the expectation that your asking price can be adjusted if there's no action in the first few weeks. In the meantime:

  • Other homes in your neighbourhood will look pretty good compared to yours and will likely sell first.
  • While waiting to see if there's any action, you're losing customers. Most activity on a home listing occurs within the first few weeks. After that, interest starts waning.
  • Fresh listings will overtake yours, and fewer buyers will see your home while browsing.
  • You will continue to make mortgage payments, and even if the home is empty, utilities and maintenance must be paid. Weigh these carrying costs against the price you want.
  • If your home has been on the market too long because it's been overpriced, potential buyers may suspect there's something wrong with it that's driving other buyers away.
  • When you price your home over the appraised value, you risk a potential buyer's loan being rejected. Financing and appraisal contingencies could lose you valuable time.
  • A discounted price may attract deal-seekers later, but these are buyers who are looking to pay as little as possible. Unless your discount goes below market value, they're likely to look elsewhere.
  • By the time you get an offer, you may end up accepting a lower price than you would have had to accept should you have priced it correctly in the beginning.

Time is money when you're selling a house. Overpriced listings tend to languish on the market, losing perceived value the longer they sit. Sellers may choose to price above market value out of ambition or a specific strategy, but this decision can lead to leaving money on the table.

It's essential to consider these drawbacks when setting the price for your home to attract the right buyers and secure a quick sale.

Price With Market Value

When considering pricing your property at market value, you must carefully weigh the pros and cons. To make an informed decision, evaluating your property's unique aspects and current market conditions is essential.

Pros of Pricing at Fair Market Value

Setting the price of your home at market value may attract more potential buyers and increase your chances of a quick sale. This approach creates a sense of fairness, attracts serious inquiries, and prevents your listing from languishing on the market.

Real estate agents will know the fair market value of houses similar to yours, so presenting a fair price is more likely to lead to agents showing buyers your house. After all, they're working in the buyer's best interest and will inform them if a home is overpriced.

Pricing at market value gives buyers a realistic view of your home's worth, setting the stage for successful negotiations. With this strategy, you maintain flexibility while appealing to a broad range of buyers, maximizing your chances of securing a favourable deal. Understanding your property's unique features and current market conditions is key to setting the right price.

Cons of Pricing at Fair Market Value

To fully grasp the potential drawbacks of pricing your home at market value, there are a few potential considerations.

While pricing at market value often attracts serious buyers and expedites the selling process in stable or rising markets, it may result in lowball offers or no offers in declining markets. Clearly understanding your area's local market dynamics is vital to selling quickly.

Tips For Selling at the Best Price

When selling your home, it's essential to find out what your home's worth online and choose the right real estate agent to guide you through the process. Striking a balance between over-pricing and under-pricing can help attract the right buyers and secure a good sale price.

Find Out Your Home's True Worth

While online estimates can be a helpful starting point, it's essential to consult with a real estate agent to verify the accuracy of the assessment. More importantly, the agent should provide a Comparative Market Analysis (CMA) to help you determine your property's fair market value. This analysis considers various factors such as the location, size, age, and condition of the property and recent sales of similar properties in the area. A comprehensive CMA will offer a clearer understanding of the property's value, enabling you to decide whether to proceed with the purchase.

Choose the Right Real Estate Agent

Before listing your home on the market, it's crucial to choose the right seller's agent. Look for an agent who understands local market dynamics, can accurately price your home, and has a proven track record of selling similar homes at or above market value. A skilled agent with a great team can help you navigate negotiations to secure the best price.

Effective communication with your agent helps ensure your home sells for the best price. Favour the agent who can provide you with a customized marketing plan to maximize your home's value.

Strike a Balance Between Over-Pricing & Under-Pricing

Setting a fair market value for your home is crucial for attracting potential buyers and getting the best possible price. Consult with a professional real estate agent to determine the right price based on its location, condition, and other factors affecting its value. This can prevent a stagnant listing and increase the chances of a successful home sale within a reasonable time frame.

Decide Between Renovations and Selling As-Is

While renovations can boost your home's value and make it more appealing to potential buyers, remember that not all upgrades are created equal.

A roof replacement, for example, may offer a better return on your investment than a wood deck addition. An expensive kitchen upgrade might not return its full value when it comes time to sell, but upgrading an outdated kitchen could be vital. Some DIY projects like painting, landscaping, and other cosmetic upgrades are cheap, but they can increase curb appeal and lead to faster home sales, making them well worth a small expense. Consult with a real estate agent and a contractor before making major renovation decisions. If possible, calculate the return on investment for renovations against the potential selling price increase to make an informed decision.

On the other hand, selling the property as-is can save time and money and may appeal to investors looking for fixer-upper opportunities. If speed is of the essence, accepting a lower selling price in exchange for not having to make repairs could be a good move.

Market demand and the current condition of your property are significant factors to consider when deciding between renovations and selling your home as-is. Make the choice that best aligns with your goals and financial expectations.

Using Digital Photos to Sell Your Home Faster

High-quality digital photos of your home can significantly increase the chances of selling it faster. When preparing your home for a professional photo shoot, the real estate photographer should capture your home in the best possible light. An excellent exterior shot is crucial, as it can grab the attention of potential buyers and make them eager to see what's inside.

If you're planning to sell in the winter but have enough time to do photos in the summer, green photography can really make your home stand out in comparison to snow-covered shots.

Lastly, consider using real estate photography trends like twilight photography, drone footage, and virtual staging to boost your chances of a quick sale at the best price.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

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