Let's face it, when you are looking for a house, you do not consider a mansion if you only have buying power for a cottage. Prospective buyers of your home will have thought very seriously about two things: location, and the amount of money they wish to spend on a property. Therefore, your first task is to assess the current market and fix a realistic price for your home.
If your asking price is too high, you will eliminate many prospective buyers. If the price is too low, you will lose money unnecessarily. It pays to set the price of your home as competitively and accurately as you can.
Remember, most prospective buyers will look at other properties before they make you an offer. You
must select your selling price to be competitive in the current housing market. To help you arrive at the right price tag, there are precise steps that you should follow.
• Read the real estate columns in all publications offering residential property for sale to get an idea of asking prices. This should become a daily routine during the whole period of marketing your property, so that you are aware of trends and fluctuations in the property market.
• Familiarize yourself with current interest rates and look for any major changes that could affect the property market. When interest rates for mortgages are low, the property market is buoyant, but when they escalate to over 14 percent the market slows down. Buyers and sellers become cautious about incurring more debt than they can carry.
• Go to "open houses" in your own neighbourhood and in comparable areas and look at properties that are similar to your own.
• How many properties should you look at? Put yourself in the buyer's shoes. Most prospective buyers will look at eight to twelve properties before putting in an offer to purchase. You should view at least that many. The more homes you look at, the better you understand current market values and prices.
• Make appointments to view as many as possible of the homes comparable to yours that are listed. Use that time with the real estate agent to ask why the price of the property was set at that level, and discuss in detail the features of the home. This will be a valuable learning experience for you.
• If you feel a home is accurately priced, ask that listing agent to appraise your property.
• Have your house appraised by at least two experienced real estate agents. Don't worry about taking up their time. Most prospective sellers talk to more than one agent before deciding on the one to use. This is a competitive situation and you are representing your own interests. And just in case you do decide to use an agent, this is the best way to appraise them!
• You may wish to call upon a professional appraiser. Banks and other financial institutions use their services when assessing a property for a mortgage. Estimates by a professional appraiser are always conservative — usually 10 to 20 percent lower than current market value.
• Record the difference or "spread", between the "listed" price and the "selling" price of properties similar to your own in your neighbourhood and comparable areas. You can find out this information during your round of chats with agents. They will know by heart what these figures are since it is in their interest to keep abreast of current market trends.
• Once you have determined the spread, set your asking price above the lowest price you will accept within this range. Use the four-step formula below to determine your asking price.