Price tips

B - Set Asking Price: The wrong reasons?

Establishing your asking price is frequently based on irrational motivations. Any headlines below apply to you? 

Set asking price based on what you need

The market determines a home’s value/selling price. Wanting a certain selling price doesn’t make your home worth more.

                      EXAMPLE

A retired couple decided to sell. Despite professional suggestions of a realistic asking price, they priced their home too high. They needed enough equity to pay cash for the home they had seen in a beautiful empty-nester community.

No serious offers came their way but they were determined to hold out. In the year they waited to sell, the price of their empty-nester patio home decreased considerably. But so did the value of their home

It’s hard to price logically when you need a certain profit.

Set asking price based on what you paid for it

This often occurs when sellers recently bought but must turn right around and sell. During a normal or slowly appreciating housing market (let alone a down market), the passage of time has not had a chance to reflect an increased value let alone cover the agent's commission.

                      EXAMPLE

One builder constructed a pair of identical homes that were on opposite sides of the street. The costs to build were the same except that one house had to have its water and sewer lines rerouted due to unforeseen problems. This house incurred additional expenses of $6,000.

It would be tempting to factor that $6000 cost into the asking price. But this builder knew that despite the difference in cost, there was no difference–from the buyer’s perspective–between the two finished products. The houses were priced the same, and they both sold. One simply made $6,000 less profit.

An investment you have in your own home doesn’t necessarily translate into increased value in the buyers' eyes.

Set asking price based on the highest sale

A home's value usually falls within a range that's based on selling prices in a neighborhood. But homeowners usually want to base their asking price on the home that sold for the highest price in this immediate area.

That one sale doesn’t reflect typical values, just as a similar home that sold for the lowest price doesn’t either. Use logic and reason to establish your price.

Set asking price based on quality components

Extra structural components–roofing or structural reinforcements, for instance–that are hidden from view won't bring much in the way of added selling value. These include top-of-the-line furnaces, underground sprinklers, premium mechanical upgrades, heavy-duty nails, etc.

Some values are lost because people can't see them. Even cutting edge luxury features don’t always command a decent payback. Appraisers don’t value these hidden components either. 

Super structural features and top-of-the-line features command premium prices when they're new. They're admirable qualities but not ones that provide a good pay back. If you knew then that you’d be selling now, would you have installed these top quality items when building or improving your home?

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