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If you're selling your house, one of the first steps you'll take
is setting an asking price, a maneuver that requires the ability
to find the perfect balance between attracting solid offers and
ultimately receiving top dollar.
If you're working with a Realtor or other industry professional,
you'll probably hear talk of fair market value, which typically
means the highest value an educated buyer will pay. Fair market
value is usually not the asking price.
Many agents will begin by conducting a competitive market analysis
of your house and give you an estimate of the fair market value
of your home, which is a range that will fluctuate depending on
the housing market in your area and how much similar homes in your
neighborhood are selling for.
While overpricing to some degree can be beneficial, you'll still
want to be careful and avoid pricing your home too high, which
almost always is nonproductive.
As you work with your agent and set your price, you'll want to
recognize the factors that may prompt you to raise your asking
price too much when it isn't warranted. Some of those factors include:
- Upgrades have been added. While many home improvements will
help you recoup a good chunk of your investment, it won't give
you
100 percent of what you paid. Also, the more personal the
improvement - a swimming pool, a sunroom, purple floors - the
less likely
it will be viewed favorably by potential buyers.
- The need for money.
- You're moving to a higher-priced area.
- The original purchase price was too high.
- The seller lacks factual comparable sales to prove what the
market value is.
- The seller wants bargaining room (listing more than 1-3 percent
above market value actually reduces bargaining power).
- An unnecessary move, so you're not motivated.
On the other hand, if you're in a neutral or buyer's
market, you'll really need to be cautious in setting
your price.
Generally, the asking price - the price advertised when it goes
on the market - is set slightly higher than market value, usually
1 to 3 percent above market value.
You should assume that negotiation will be necessary to reach
an agreement with the buyer. If you price your home too much above
market value, you'll get fewer showings and offers in which the
potential buyer is fishing to determine how low you'll go.
You'll want to establish your priority list: Are you more concerned
with selling quickly or getting the most money possible? You'll
also want to contemplate whether you think the agent's suggested
price is reasonable and whether you'd pay that amount if you were
a buyer.
Your agent, as well as friends, relatives, and neighbors, will
help you point out your house's advantages and disadvantages that
you may not have thought about because you're too close to the
house and not as objective as others.
A third party will help you think of your house as a commodity
- something with positive and negative selling points. At that
point you can decide on a price that you deem competitive and in
line what other houses in your
area have sold for.
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