Price setting has been compared to a science, but you don’t have to be a professor to do it accurately and effectively.
Price setting has been compared to a science, but according to a statement made to The Washington Post by Michael Seiler, professor of real estate and finance at The College of William & Mary in Williamsburg, Va., what “most homebuyers don’t realize [is] that setting an asking price is primarily a negotiating tact.”
Here are a few simple strategies to help you set a home price:
1. Nobody cares what you paid for it – One of the hurdles agents are forced to handle is the common misconception that putting money into a home means that you’ll automatically recoup those losses when you eventually sell. A $10,000 bathroom doesn’t make a $300,000 house worth $310,000, and the reason is simple: nobody cares what you paid for it.
2. Bring comparables – In his recent interview with The Wall Street Journal, Seiler touted the importance of bringing comparables to the appraiser, saying that without the information, “an appraiser will have no clue what a property is worth. In homes without comparable sales data, he said, we often see the widest price gaps.
3. Provide an exact figure, but lower – The human mind is interesting in the way it perceives information. Take, for instance, a home that’s listed at $900,000. The most obvious characteristic of the figure is that it’s rounded, which suggests estimation and tells people, according to Seiler, that it’s open for negotiation. A more exact figure, like $876,489, he said, shows buyers that the seller is both confident in their price and less willing to negotiate. Additionally, by dropping the price down below a larger, rounded figure, the home appears “way cheaper.”
4. Consider the timing – Just like any product, demand for homes rises and falls throughout the year, and agents listing homes should be careful to price their homes consistent with the selling season, inventory and level of demand. Obviously, these factors are bound to be different depending on where you are, but access to the information is as easy as a trip to Google.