If you are selling a house in today’s buyers’ market, it must be advertised at a fair, market-related price or your property will not attact any interest from potential buyers.
Factors Affecting Pricing when Selling a House
The advertised selling price of your house will depend on these factors:
- What you owe on your bond. Ideally, the house selling price should be greater than the outstanding bond (plus expenses such as estate agent fees) so that you don’t end up still owing money to the bank after you have sold the house.
- What other houses in your immediate area have sold for recently. It is important to realise that you need to look at the actual selling prices achieved (which means you need access to data from the Deeds Office), and that you compare your home only to other houses in your local area. House prices do not always move up so be careful to only look at recent selling prices.
- What other houses in your immediate area are currently on sale for. Remember, the advertised selling price for a house and the actual price achieved are often very different. As a rule of thumb, the actual price achieved can be 5-10% below the advertised price but this percentage can vary widely depending on the state of the market. We have even sold properties at prices higher than the listed price!
- The opinion of an experienced, honest local estate agent. The estate agent should be able to give you a good estimate, but beware – some agents may suggest an overly optimistic value in order to win the mandate to sell your property. In a tough property market, an agent that gives you a valuation that seems high is probably not someone you should trust with selling your major asset.
- A computerised valuation estimate of your house. There are a number of companies that provide this service but some are considered better than others.
- The most recent municipal valuation. Usually this value will be below the current market price (unless the municipal valuation was done when the property market was at its peak) but it does provide some form of reality check when setting a price for selling a house.
- The estate agency commission. Some agents add their commission to the fair market value but this can seriously impact the attractiveness of the price.
Should You Start with a High Price when Selling a House?
Many sellers want to start advertising their house at a high selling price, and then, if they don’t attract a buyer, they believe they will have a second chance at getting buyers by lowering the price of the house later.
This is almost always a bad move.
A house attracts the most attention from buyers by far when it is first listed because potential buyers are curious and they think there is a chance that they can get a great property before everyone else. But if the selling price is too high relative to other properties in the area then most buyers will ignore the listing. This is because buyers don’t like the idea of having to haggle with the seller in the hope of possibly getting the price reduced to a fair one. It is just too stressful. Since there are currently so many properties offered at fair or bargain prices, why should buyers bother with an over-priced one?
Usually an over-priced house will get minimal interest from buyers. When the price is reduced, there may be some interest but it will be substantially less than if the house had been advertised at the correct price when it was a new listing.
The mere fact that your home is on the market for a long time can lead people to expect that there is something wrong with it.
Don’t fall into the trap of pricing your home too high. You will lose all the potential early interest from buyers. Selling a house is much more difficult if buyers have already seen it advertised for months on end.
There are thus 2 realistic pricing options when selling a house:
- at market price
- below market price.
The first option for selling a house seems obvious but the second needs some explanation.
If you price your property at a below-market price, you will get a lot of interest – much more than pricing it at a normal price, which will obviously increase the chance of selling your house quickly. But, you say, I will have to sell my house at below market price! Possibly. What could happen however is that you may receive multiple bids. In this scenario, it is often the case that the house gets bid up to the market price by eager, competing buyers. So you get your price by encouraging competition from buyers!
Pricing at a below-market price is a quick and adventurous way of selling a house that not everyone will feel comfortable with. If you really do need to sell your house quickly then it is worth considering. Remember, you only need to accept an offer that you are satisfied with. If you want more advice on setting a price for selling quickly, we would love to help you!