Ask a hundred people, and you may get a hundred answers to the question “How should I determine my list price?” In reality, there is a very specific way to approach setting the right price to deliver you the maximum benefit.
Yes, this process is counter-intuitive
The natural thought is that a home’s value is tied to the list price, so the higher the list price the higher the value, and thus the higher the selling price. This can be evidenced by numerous people seeing a neighbor list their home at a higher price than the market will bear, and thinking their home is thus worth more. This line of thinking is completely normal, and also very dangerous to your net worth if you fall for it.
The approach to take
A seller should always price the home where it will maximize exposure, be of interest to the largest number of people and drive the market to pay the highest price. This is true in any market … a Seller’s Market, a Buyer’s Market or a balanced one — although inventory levels, overall activity and # of days on market can vary widely between those markets.
Either listen to your pride or listen to the market
Of course, every seller wants to sell for more than they paid. It’s an unspoken belief shared by everyone who’s ever owned real estate, but that doesn’t mean it’s true. If you hold onto a home solely because you paid more for it, just remember you’re listening to your pride.
I have heard several owners say they’ll wait until it’s worth more than they paid. I’ll never argue or try to talk them out of it. I will ask them however if the price they paid or the amount they currently owe is more important to them. I’ll also create a “net sheet” based on their current mortgage balance and other expected costs so they will have a clear understanding of what to expect right now at a closing table.
If (a) money can be expected from a sale, (b) they truly want to sell and © the sole reason not to is because the current market won’t support what they originally paid — I will also ask “What else could you do with that money?” That may help remove their emotion from the thought process, and just keep the focus on the potential equity available to use elsewhere. Ultimately, the choice is always theirs to make.
Bear this in mind
The market doesn’t owe you, me, or anyone anything. Ever. This is about making the market create the best outcome for you as a seller at any given point in time.
… Now be sure to read the last half of this story …