Let’s look at how to create a pricing strategy that works for your business. Here are the Best House Pricing Strategies.
How to Determine House Pricing Strategies
Every decent homeowner wants the best price and terms for his or her home. Several factors, such as market conditions and interest rates, will influence how much you price your home to sell. Your pricing strategy is determined by your target audience, their willingness to pay, and what your competition charges for similar models. The goal is to get the best price and terms possible during the window of time when your home is being marketed.
Let’s look at how to create a pricing strategy that works for your business, whether it’s your first or fifth pricing strategy.
House Pricing Strategies #1: Begin by obtaining a free online home valuation estimate.
When it comes to determining the asking price for your home, automated valuation models (AVMs) can be a good starting point. An automated valuation model (AVM) is a software-based tool used to determine property value in residential and commercial real estate. To determine the value of a specific property, the service employs mathematical or statistical modeling in conjunction with a collection of existing databases.
AVM tools use real estate market data and property details such as your home’s floor area, location, number of rooms and baths, and other factors to generate an estimate of how much your home is worth.
A word of caution: home estimate tools are not the end goal of your pricing strategy. Real estate agents will consider hundreds of minor details that AVMs do not always consider, such as a home’s vicinity to a huge power line, noise levels, alignment on a steep hill, or general buyer feelings in the area.
House Pricing Strategies #2 : Set your price based on a comparative sales analysis, not on your feelings.
Auto dealers consult the handy “Kelley Blue Book” to determine car prices and values. But you won’t find a comparable pricing guide for your home. Property values are hyperlocal and constantly changing, real estate professionals such as agents and appraisers rely on comparable sales, aka “comps,” to price individual houses. A CMA is a powerful tool that gathers comparable properties in your area to help you determine the value of your home.
The “strategy” here is to assess the competition and establish a price range from which you can add or subtract value based on the unique positioning, features, and renovations of your home. To determine an appropriate initial asking price, your real estate agent will prepare a CMA by examining approximately ten properties that are comparable to your own home in location and size.
House comps also put a crimp in your rosy-eyed view of a home that holds so many memorable moments, where pencil marks on the walls once recorded your changing height and, later, the growth spurts of your own children.
House Pricing Strategies #3: Set your price lower than the competition’s to spark a bidding war.
Pricing a home is not as easy as it sounds. There are a lot of considerations to take into account and a lot of factors that can affect a home’s worth. Pricing a home correctly will ensure that you get the best sale price possible. Are you intentionally undercutting your price? Isn’t that crazy? You’re trying to get more money for your house, not less. This strategy, however, has a time and a place. The first is in a buyer’s market, which occurs as there are more homes on the market than buyers making an offer, which actually results in a supply and demand imbalance that favors buyers.
In that case, pricing even slightly lower than your competition can help your home stand out from the crowd and reduce the number of days on the market. A lower asking price does not compel you to accept a great bargain sales price. In fact, in the right circumstances, undercutting your price can generate multiple offers and create a sense of urgency among buyers. Multiple bids? Yes, you have just started a bidding war!
House Pricing Strategies #4: Make a price adjustment to account for online pricing benchmarks.
Once you’ve calculated the estimated value of your home, small price adjustments may increase the exposure of your listing on the most popular home search websites. That’s because, on sites like Zillow, buyers use filters to nail down their search results — and the most important filter is price. Buyers establish a minimum and maximum price range in $25,000 or $50,000 increments, and then only look at homes that fall within that range.
Most people will simply set their range based on their budget, without considering the intricacies of how the filters work. Given that 44% of buyers begin their home search online, typically through their mobile phones, and 52% of buyers found the home they ended up purchasing online, it may be worth setting your price just below the filter threshold to get noticed.
House Pricing Strategies #5: Price your home in accordance with the seasonal changes in your market.
Did you know that depending on buyer behavior and the seasonality of your market, homes sell faster and for more money at different times of the year? According to our data, selling your home at the right time can increase your profits by more than 75%. During the spring and summer months, your market may see an increase in buyer demand as parents look to settle down before the school year begins. Another surge could occur in early winter when buyers relocating and starting new jobs need to find a new home as soon as possible.
Markets with a high concentration of retirees may see an increase in the fall when snowbirds like to buy second homes just in time to escape the cold weather up North. What does this mean for the price of your home? Assume you were aware that homes in your area sell for approximately 5% above list price during the market’s peak season. You could demonstrate a hefty price tag by knowing that buyers are competing and willing to pay more during this time of year.
House Pricing Strategies #6: Will you go against our advice and shoot for the moon? Set limits in case you have to cut your losses.
Homebuyers weren’t born yesterday; they’ve done their research and gathered comparables to get a good idea of what homes on your block are selling for. You’ll have a difficult time scheduling open houses if you’ve priced your home significantly higher than the competition. But suppose you have your heart set on a higher price and refuse to budge. At the very least, you should have a clear plan in place for cutting your losses if your home is on the market for longer than it should be.
The average time a home is on the market is determined by a number of local market factors, including interest rates, property value trends, and home inventory levels. According to the National Association of Realtors (NAR) 2019 Profile of Home Buyers and Sellers, recently sold homes spent a median of three weeks on the market.
Get the price right, and everything else will fall into place.
Every single home is unique, with a different set of features and amenities. This is why pricing a home correctly from the very start can be a challenge. Work with a real estate agent who can serve as your intellectually honest set of eyes and who is well-versed in your local real estate market. We’re here to help you!