5 Common Mistakes When Deciding on a Home’s Initial Asking Price

Published March 20, 2018 by Real Estate Leads

AdobeStock_4495415It doesn’t take either a homeowner or realtor to understand that deciding on an asking price for a home is a process that isn’t straightforward in the slightest. And it’s very rarely an obvious equation either, with a whole host of specific factors coming into play that are unique to the home, the homeowner, and the neighbourhood.

A client’s asking price is one of the most important things to evaluate with them as you prepare to list a home. A property that is priced too low may result in the client selling themselves short and receiving ‘low ball’ offers. Alternately, being priced too high may result in no offers being presented at all.

Here at Real Estate Leads, our online real estate lead generation system is proven effective for creating more client generation opportunities for any realtor that could use the assistance in the formative stages of their career. Once you have that opportunity, the best way to impress a would-be client is to know your stuff – and make it clear that you know your stuff!

Knowing what a home is worth and being able to communicate that logically and effectively is a big part of that. Here are 5 pricing mistakes you can have your client avoid to ensure they’re getting the most out of their home sale:

  1. Basing their price on another home’s asking price

Homeowners can ask whatever they want for their property, but that doesn’t mean that your client should be basing their decision based on what neighbours have sold for. They don’t want to be caught making the same mistake if that home – unbeknownst to them – didn’t sell for anywhere near what was being asked for it in the beginning. Instead, clients are best advised to base their price on what similar homes in your neighbourhood have clearly sold for and looking at many of them is an essential part of that evaluation.

  1. Basing their price on recent renovations

Expecting to see a 100% return on investment with renovations is entirely unrealistic, especially if the renovation was specific to the clients’ own tastes, many of which are off-putting to potential buyers. If your client is renovating for the purpose of increasing a sale price, advise them to make sure the renovations are neutral and be up front with them about the reality of any such unrealistic expectations.

  1. Basing their price on how much of a return they ‘need’

Sellers who have bought a new home before they sell their previous one are often inclined to believe they need (and are entitled to in some cases) to sell their home for $X in order to pay for their new one. Others will approach it thinking that they need to sell for $X in order to make a profit on the house.

The problem with this line of thinking is that it bears no relationship to market dynamics and realities. These types of buyers tend to have homes languishing on the market before they often eventually sell for a much lower price. Advise clients that it is better to save themselves the additional mortgage payments by setting a fair price from the start.

  1. Basing their price on a different type of home or a home in a different location

If your client owns a semi-detached, they should not be comparing their home to the detached home that recently sold around the corner. That’s a different home and even though the location isn’t what they’d consider to be any different – it is a different location, even if it’s just hundred of metres away. The same goes for the neighbourhood – comparing usually leads them down the wrong path. It’s part of a good realtor’s responsibility to steer them away from that.

  1. Starting with a “Let’s see at this price” point

The most common mistake homeowners make is starting at a higher price ‘just to see if I’ll actually get it.’ If clients know how much they should realistically receive from the sale, then they should be pricing their home accordingly right from the start. Anyone who overprices their newly-listed home will be eliminating many buyers who identify your inflated price as being out of their budget. Sometimes these buyers are your ideal buyers, but that original error eliminates them from the picture permanently

So much of your clients’ success as sellers depends on setting the right price for their home within the current market. Keep in mind that the longer the home has been for sale and the greater number of times they’ve had to reduce their price, the more likely buyers are to think there must be something wrong with that property.

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