Who sets the price? Tips for working out the value of your home when selling.
When it comes to the value of our home, we all have our own idea as to what it should sell for and what we believe its value to be. Our emotional tie and perceived value of our property generally relates to the amount of money we’ve invested in it, the memories we’ve created in it and the amount of time or ‘blood, sweat and tears’ we’ve put into renovating, maintaining or building it.
But every buyer also has their own situation and top price that they will pay for a property and it doesn’t really matter how much we love our home – the value will largely depend on supply and demand in the property market and what buyers are ultimately willing to pay.
This means that sometimes there can be a large discrepancy between our expectations and what buyers are willing to pay for our home. We’ve put together a list of things that we think you need to know when it comes to pricing and placing your home on the market:
- When providing a valuation, real estate agents will typically complete a competitive market analysis on your home by choosing a number of homes that have recently sold, similar to yours and in your local area. These sale prices are then adjusted to reflect any differences in features and location in comparison to your home. It can pay to ask your agent to explain their comparison method and reason for choosing the list price and to check that when the homes were sold, if they’re in your neighbourhood and how similar they are to the features of your house.
- The supply and demand of homes in your neighbourhood or market will play a large key to the value of your home and how quickly it may sell. Your home may have certain features that are in demand in your area such as proximity to good schools, transport and shops, closeness to beaches or parks, open plan living, a double garage or swimming pool. But if every other home in your neighbourhood also has these features then you no longer have a competitive advantage.
- It’s important that you leave room for negotiations. It’s unusual for a buyer to offer exactly what you’re asking for in the first offer, so you should expect some negotiations in the process. Make sure your listing price has room for this bargaining process.
- The building and pest inspection process may be another point in which a potential buyer may try and negotiate a reduction in price. If the inspections find minor conditions then these may be overlooked but if the report finds more major issues then buyers may use this to leverage a price reduction or to demand repairs. This can sometimes be more likely if you’ve got full or near full price for your property or haven’t budged during the price negotiations.
- Although it can often be tempting, testing the market by listing the property for higher than you think it is worth can sometimes be risky. Buyers will often check the length of time your home has been on the market for and may use the ‘days on the market’ as leverage to make a lower offer. For auctions and expression of interest sales, sometimes agents put the property on the market for less than the desired price to increase the amount of buyers interested and create competitive tension.
- Make sure you have a clear understanding of how your agent will list your property and differentiate it from other properties on the market. Your agent should also have a clear understanding of your expectations on how long it will take to sell. If you want to monitor things more closely you could ask your agent for regular market activity reports which can provide a good insight into what else is selling in your area.
There are many influences that will impact the price and sale process for your home and we’ve only listed a few here.
What’s most important is to have realistic expectations and to maintain a good relationship with your real estate agent as this will often be the key to a quicker and more realistic sale.
If your’re thinking of selling and are unsure about any aspect of the process, feel free to contact one of the Inspired Money Team on 08 6222 7909 and we would be only too happy to assist and hold your hand through the process.
Sourced from the Inspired Money Financial Knowledge Centre