While the key criteria for selling a house may be “location, location, location,” there are two very distinct strategies for setting the selling price for your home: ask for more-or-less what you want, or lowball and hope for a bidding war.
Building a Bidding War
In a hot real estate market, a common (almost clichéd) strategy is to list a place for lower than what you want, to entice the most potential customers, then hope to create a bidding war where multiple would-be owners compete and keep upping the ante. The secret is to set an offer date that allows enough people to view the place, without it dragging out too long for them to lose interest (or buy another place first). Usually, a week is long enough. Post the listing midweek, allow for a weekend of open houses, and then take offers a week later.
Savvy buyers – on the advice of their agent – will wait until the last minute to present their offer, so you’ll sweat through a day of waiting to see how many, if any, come in. But when they do, you’ll be able to read through them and, if you think there’s enough interest, send the best ones back for a counteroffer.
The potential downside is that offer night will come and go with no offers presented, save one or two extremely lowball ones. If you’ve got the courage to resist those, you’ll find the tables have turned and you’re now at the whim of buyers. In a hot market, a house that doesn’t sell on offer night will likely call up the inevitable, “What’s wrong with the place” question?
Ask For What You Want
This tactic, more common in a slow real estate market, is to list the house for roughly what you want to get. The key to this strategy is figuring out what you can reasonably expect to get for your place. More on that in a moment. But first, note that if you set the price too high, you won’t get enough interested viewers and you run the risk of your listing going “stale” and encumbering the same bad vibe as a failed bidding war that attracted no bids.
On the other hand, set the price too low and you’ll be hard pressed to get anything higher. Regardless, keep in mind that there’s nothing compelling you to accept any offers. (That said, it’s worth noting that some agent agreements will include a clause that they’re entitled to be paid their commission if a “reasonable” offer is tendered, even if it’s declined. Most would rather overlook that than face the bad business blood this would entail, but you should carefully read all the fine print in any agreement you sign.)
Where to Start
Regardless of the approach you take, you’ll first want to have a sense of what your place should be worth. If you’re working with a professional real estate agent who’s familiar with the area you live in, he or she should be able to quickly suggest a range in which they expect the place would sell for. But you’ll probably want to have a ballpark idea long before you get to the point of meeting with an agent. To do that, you’ll need to review recent sales in your neighbourhood. The key is to compare apples to apples, and add or deduct accordingly.
Proximity to reputable schools, transit or key commercial strips can be a sale-boosting asset, but if it’s located too close to noisy highways or rail lines, for example, you’ll take a hit. Does your place have a garage and driveway big enough to park a fleet of vehicles, or are you in a tightly packed urban area with only on-street parking available? Most buyers will balk at paying top dollar if they can’t drive right up to their door. And most eye-catching of all: renovations. New windows and a recently redone roof are nice, but updated kitchens and bathrooms are the real eye-catchers that can bump up the sale price.
The hardest part of this process is eliminating the emotional factor. Buyers don’t care that this was the place you carried your bride across the threshold, or raised your babies in. They’re looking at the bricks, mortar, and esthetic improvements contained within. If you find it really hard to distance yourself – and your personal memories – from those walls, it’s probably time to call in an agent for a detached professional opinion.