As someone half-way through the process of selling my own home, you will hear little criticism from me over homeowners who wish to see the highest return possible from the sale of their home. We all purchase homes with an unspoken expectation that if we stay in the home long enough, the sale will pay for itself with a little equity left over to put toward our next home purchase. This is a completely normal and acceptable way of thinking in my opinion.
Stepping into the shoes of a buyer, albeit nearly impossible, would offer an eye opening glimpse into how your home is viewed and compared to those of your competition. Buyers are looking at more homes today than in the past prior to making their final decision, so your home's position is more critical now than ever. The one factor having the greatest impact on your home's positioning within the market is its list price.
That said...the price point at which you put your home on the market has negligible influence over what a buyer is willing to pay and is not as much a concern to the buyer as one might think. A buyer's focus is directed to your list price during two critical points in their decision process:
Your list price determines whether your home will fall within the search criteria selected by the prospective buyer or their real estate agent. Anticipating that many homes in today's market are overpriced with respect to their Fair Market Value (FMV), some real estate agents may extend the upper limit of the search by $10,000 or so to provide a better selection of homes for the buyer.
There are critical price points which determine your home's exposure to various pools of buyers, so be sure to ask your real estate agent how your home is positioned within these particular price point thresholds. You could do yourself a great disservice by pricing your home just $1,000 out of the reach of a new pool of buyers!
Deciding Whether to Make an Offer
Sadly, this is where most sellers miss out. Once a buyer has decided that your home is right for them, they turn their focus toward the home's FMV. Neither the seller nor their agent can dictate the FMV of a home...it is instead determined by the market itself. As a REALTOR®, I interpret the latest sales in your area to determine your home's FMV and make my pricing recommendations based on this number. The buyer's REALTOR® will do the same! I want to reiterate again...your list price is given no consideration when determining your home's FMV.
I will give three likely scenarios demonstrating a buyer's thought process:
If a sizable disparity is discovered between the home's FMV and list price, the buyer may decide to forgo the offer all together. In this scenario, the buyer feels that in order to get the purchase price in line with FMV, it would require an uncomfortably low initial offer and only through days of negotiations would the chance of obtaining a fair purchase price by obtainable. The buyer passes on your home and moves on to the next home on their list.
A sizable disparity is discovered between the home's FMV and list price however, in this scenario, the buyer still would like to place an offer on your home in hopes of reaching a fair contract purchase price. The buyer can submit a ‘best and final' offer to avoid the back-n-forth...not as common as I would like to see. Most likely, the buyer will submit a low offer to start the negotiating process which, after several counter-offers, either an agreement is reached or the buyer walks away.
If the list price is within a realistic range of the home's FMV, the buyer considers a greater chance of reaching a purchase price that is fair to both parties. In this scenario, the buyer is most likely to present an offer at, or near, full price. Not only will you receive a higher sale price for your home, this initial offer will present itself earlier into your listing period and allow you to conclude the sale of your home and start enjoying life in your new home!
What Are Buyers Looking For?
The great news is that not all buyers are out there looking for a ‘deal'. Of course there are some, but there always will be. Most buyers just want to purchase a home at a fair price without the exhausting hassle of counter-offer after counter-offer...after counter-offer. The homes priced within a tight range of their FMV are not only attracting showings, but they are the ones actually receiving accepted purchase contracts. And these sellers are the ones moving on to that next place to call home!
The next time a real estate agent mentions the concept of receiving more for you home by lowering the list price...sit them down and have them explain! I assure you that their reasoning is sound and is worthy of your attention and time!
If possible, make the time to take off the ‘seller hat' and try on the ‘buyer hat' for just a moment and think about your upcoming experience as a buyer. The conclusions you'll come to could do wonders in removing the obstacles in place throughout the selling process. Besides...if I'm the one listing your home for sell, you'll have that ‘buyer hat' on sooner than you'd expect!
Considering a move in the future? Contact me via e-mail, or call me at (502) 641-9802, for consultation on your home's Fair Market Value and to learn how I bring my sellers together with dreams of a new home through my active marketing strategy!