So you're ready to put your house on the market. You've painted, cleaned out the closets, and spruced up the back yard. Now comes the hard part--deciding how much money to ask for. Do you price higher than you want and leave room for negotiations, or price lower than you want hoping for multiple bids?
Get greedy and your home could sit on the market for months. Lowball it and you may leave money on the table.
"Pricing," said Ray Brown, co-author of "House Selling for Dummies" (For Dummies, $21.99) "is so subtle."
The hard part, real estate agents say, is that there is no fool-proof method to pricing a home. What works for one house in one town won't necessarily work for a similar house in another town.
Although they don't agree on a method, real estate agents and others say there are two main schools of thought when it comes to pricing your home. You can price your house low, hoping potential buyers will bid up. Or you can price it a few percentage points higher in expectation that buyers will leave room to negotiate when placing a bid. Both can fail. Both can work.
Suzanne Roozen, who sold her four-bedroom West Hartford, Conn., colonial last summer, chose to list her house at the upper end of the $309,000-$319,000 range suggested by her agent. But she was nervous about it, she said. The home was in a popular area where houses sell quickly and prices rise rapidly, making comparisons difficult.
Roozen worried that she might price the house too high, based on the quick sales of nearby homes.
"I'm aware people think their houses are worth more because they are emotionally attached," said Roozen. "If you put it on too high and you have to drop the price, it is the kiss of death."
But Roozen didn't have to drop the price. Within 24 hours of listing her home, she had seven offers, all above the asking price. She settled on a bid for $346,000--giving her second thoughts.
"You get greedy. You wonder, maybe I should have listed even higher," she said.
The best way to price your home, say experts, is to find the fair market value based on prices of other similar homes. The worst way, they say, is to list it at what you want your home to be worth and what you need to receive from the sale to buy your next home.
"Forget what you need to get out of your house. That doesn't enter the equation," said Brown.
In a seller's market, where there is low inventory and high demand, experts say home sellers can also fall into the trap of unrealistic expectations. These sellers hear stories of homes selling within an hour of listing and blithely disregard any factual pricing methods. Instead, they list their two-bedroom ranch by the town dump at an unrealistically bloated price, and it sits on the market for months.
Other sellers jack up the price moderately to leave room for negotiation. But real estate agents say this holds some risk. Some buyers won't even make a bid because they think they can't afford the house. Others could be turned off because they think the house is not worth the listing price so they won't bother even making an offer.
"If you are going to come in and pack your price to negotiate, they will come in low to negotiate and so you come in far apart," said Brown.
Molly Abends, a West Hartford real estate agent for Prudential Connecticut Realty, said sellers above all need to be realistic when setting a price.
"Price it close to your expectations," she said. "If priced well, buyers will see value and it may go into multiple offers and you may get over your asking price."
Carol York, owner of For Sale by Owner Connection in Canton, said she advises clients to list about $2,000 above fair market price to leave room for negotiation.
"Before, agents used to price it $10,000 over because they figured buyers will talk you down. But you want to price it close to what you want to end up with," she said.
York suggests that home sellers pay for certified appraisals before listing to inform them of the true worth of their homes and not just rely on a real estate agent's market analysis.
She also cautions sellers to be wary of agents who suggest inflated prices to get the seller's business or a lowball price to sell the home fast for the agent's sake.
Experts also suggest that sellers get their homes inspected before placing them on the market so they know what issues may come up and can factor those costs into the selling price.
"Everything good and bad in a house is reflected in the price," said Brown. "It's sort of like [the movie] `Field of Dreams.' Price it right so buyers will come."