How Sellers Set Their Asking Price
For you to understand how much to offer for a home you?re interested in, it?s important for you to know how sellers price their homes. We've presented this information before from the seller's point of view, but it makes sense to repeat it here to help you understand what motivates the price sellers ask for.
Here are 4 common strategies you?ll start to recognize when you begin to view homes:
1. Clearly Overpriced.
Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to overinflate the value of your home. This is done far too often, with many homes that are priced 10-20% over their true market value. This is not in the seller's best interest, because in most cases the market won't be fooled. As a result, the home could languish on the market for months. This creates problems for the seller in that:
Be wary of homes that have been on the market for a long time. This occurs most often because the seller's asking price is too high.
2. Somewhat Overpriced.
About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either the seller believes that their home is really worth this much despite what the market has indicated (afterall, there's a lot of emotion caught up in this issue), OR they've left some room for negotiating.
3. Priced Correctly at Market Value.
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time-frame and very close to the asking price.
4. Priced Below the Fair Market Value.
Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast - usually in a few days - at, or above, the asking price.
Discuss these sales strategies with your agent. Together, you'll be able to use this information to help you structure an offer that will motivate the seller and potentially save yourself a lot of money.