The price you set for your home is very important and a major factor which will affect your success when selling. You must get the price as correct as possible at the beginning of the exercise otherwise all of your best efforts may be in vain. Having said this, it is generally not a difficult task and there are several different ways to price your property depending on how you wish to approach it. A combination of common sense mixed with factual information will enable you to set a price that will give you the best chance of a successful sale.
Quite often the terms ‘meeting the market’ and ‘market price’ are used when you are selling. This basically means that you, as a serious seller, must price your home to attract a serious buyer.
A home that is overpriced, however, would not meet the market or be near the market price. It is likely that the seller would have to reduce the price at some stage to be competitive with other similar homes.
There are several ways to price your home.
One method to price your home is to use a registered valuer. These people charge for their service of providing a written valuation. The typical full valuation is a detailed report usually describing the property in depth including location, zoning, land and property description, chattels, rates, as well as market statistics in the form of previous sales of similar properties in the area. Various other statistics may also be included showing sales trends and general comments on the market.
It is important for your own peace of mind that you use this valuation along with your own research - you may feel that after due consideration you should market your home at an amount higher or lower than the written valuation has indicated.
Note - If you do obtain a valuation it can be useful at a later stage especially when a prospective buyer wishes to negotiate on price. You may be in a position where you are able to produce the favourable valuation as an independent opinion of what your home is worth.
Most homeowners at one stage or another will have had leaflets through the letterbox from local real estate agents offering free market appraisals of homes in your area. This can be a good way to get an idea of what your home is worth however you do have a moral dilemma. You are looking to sell privately and don’t intend using the real estate agent but should you tell them that?
Some salespeople will still provide a market appraisal regardless of your circumstances in a hope that they can be of service to you at a later date i.e. they may be able to show you homes when you are ready to buy. Whether you use real estate salespeople to price your home is ultimately up to you but bear in mind that if you do get appraisals done, use them as a guide. You may find that market appraisals vary for one reason or another i.e. the salesperson’s limited experience in the local market or if they know you are selling privately, they may not spend much time on it. In some cases you may even find they talk up the value of your home hoping to secure your business with them. If you do decide to use this method to help set a price, you must also complete your own research and feel comfortable with the price you set.
Without a doubt you must carry out some form of market research. This may be in combination with real estate appraisal/s, a registered valuation or it may be the only way you intend pricing your home. Serious buyers looking to buy in your area will more than likely have a good idea of what properties are available for sale and how much they are selling for. It is best for you to take a little time to also arm yourself with this information and also use it to price your home competitively.
These are the homes currently on the market that you will be competing with. They will generally be in your suburb or area and they will appeal to the same type of buyer that would be interested in your home i.e. if your home is a standard family type house and section, then it generally would not compete with flats, units or town houses.
Some ways to find out the about the present competition are…
For Sale Signs
Keep an eye out for “For Sale” signs in your area. Check out the details with the Real Estate Agency involved or directly with the owner/vendor in the case of a private sale.
Open Home Signs or Days
Either have a look if the home is currently open for viewing or take note of when it will be. This is definitely a good way to view a competing property.
Real Estate Appraisal
If you have had or will have an appraisal done, then a list of some of the present competition (those currently on the market) should be included.
Real Estate Companies
Check out the local agencies for listings/details and location.
Real Estate Magazines
Usually a good way to find out about the competition, although not all homes that are for sale are listed. Some magazines will be used by a variety of real estate agencies while others produce their own publication exclusively for their own listings. These magazines are generally distributed free of charge. Also check out private sale publications if they are available in your area.
Keep an eye out in the property section of your local newspaper and preferably look over a period of a week or two.
Check out the major real estate and private sale Web sites for current listings. If you aren’t sure what a particular Web site address is, just use a search engine. Search using terms such as “New Zealand real estate”, “properties for sale” or “New Zealand private sale listings”. TradeMe and realestate.co.nz list the most properties for sale.
Note - To help save time, jot down all homes you have either seen or have enquired about. This will help immensely specially when the memory fades a bit or there are two of you researching the market. You will avoid the “have we seen that one?” scenario.
After you have a list of possible competing properties, it is important to view as many of these as possible from the outside and preferably from the inside as well. Open homes are the ideal way to do this but if this is not possible call the owner or agent for more information. Remember to look at those only in your section of the market i.e. if your home is a 3 bedroom family home don’t bother including flats or town houses. Eliminate those in an obviously different price bracket and be on the lookout for properties for sale that you think are priced too high. An indication will be the length of time they have been for sale.
Get as many details as possible and don’t look at this as a chore to do. You need this information to make an informed decision and price your home correctly. To make it more interesting why not make it a family thing to do. Try biking or walking around to these properties.
Once you have completed your property search and have the details about the present competition in your area you now have some factual information that will help you price your home. Remember to keep this list updated where possible. New competition is likely to come onto the market while yours is for sale and it’s good to know what the competition is doing.
Past sales are important (if you have access to them) and registered valuers use these as a basis for their valuation. They will give you a feel for what has sold recently and for how much. Again, select only those in the same market segment as you and get as many as possible. Usually sales from several years ago won’t be relevant because of changes in the market place so only use those that are relatively current, say within the last 6 months or so. Having said that, if you know the market has changed dramatically fairly recently, then take this into consideration and shorten the period.
Some ways to find out about the past sales are…
If you get a written valuation prepared this should also include a list of relevant past sales.
Quotable Value (QV)
You can obtain past sales information about any property but you will have to pay a few dollars for the details.
Real Estate Appraisal
If you had an agent look at your home then their appraisal usually has a list of relevant past sales in the area.
Try to have a look at those homes that sold recently. You won’t be able to view the inside of the house but the outside features and presentation will give you an idea of how it compares to yours.
Note - With present competition and past sales there may be some homes that for one reason or another have either been sold for a high price or are currently priced too high (i.e. older property on a highly desirable developer’s site). Alternatively they may have been sold cheaply or are priced too low (i.e. mortgagee sale, urgent transfer, transaction between family or it may have major problems with it). The normal ones are the ones you should be interested in. You should be able to spot the odd ones because they will ‘stick out’ from the rest in terms of “that seems too cheap” or “that seems too much” so eliminate those from your lists.
You have now gathered all of the relevant information you need to price your home. Here are some important considerations you will need to think through before finally deciding on the price. This includes setting a date to start marketing your property.
Urgency to Sell
Although you have decided to sell now (or will be doing so in the near future), the one question you must ask yourself is “what are my reasons for wanting to sell my home and what sort of time frame do I have to do it in?”
My Reasons for Selling (Motivation)
It is important for you to understand why you wish to sell your home as this may have a bearing on the price you set. If you want a larger home because a baby is due or want to shift into a school zone for your children before the next term, then the motivation for selling will be high. On the other hand, if you feel you just want a change after 10 years in the same place, then your motivation to sell may not be as high.
Work out your motivation to sell as either HIGH (must sell as soon as possible), MEDIUM (keen to sell) or LOW (would be good to sell). This will help clarify your situation.
Time Required to Sell
In close combination with the reason why you are selling, is the time frame in which you have to do it. This will vary depending on your situation. If for example, you are to be transferred for work, you may have been given a short notice period or you may have been informed well in advance. This time frame will have a bearing on the price you set.
Work out the time frame in which you need to sell as either SELL NOW (need to sell within a few weeks), SELL SOON (need to sell within a few months) or NO HURRY (it’s not a problem if it doesn’t sell). Again this will help clarify your situation.
The price you set is therefore likely to reflect the combination of your motivation to sell and the time frame you need to do it in. If you need an extra room for the baby and its due in 9 months time, your motivation to sell will be “high” and you will probably have a “sell soon” time frame. On the other hand, this time frame would be “sell now” if the baby were due in just 3 months time. In this situation you are likely to set a very sharp price in comparison to other similar homes for sale in the area to enable you to sell as soon as possible.
Note: Do not reveal your urgency to sell to any buyer as they may use it to drive the price down (unless of course you are at a stage where you are prepared to drop your price and really want an offer).
Unfortunately, if you have spent a reasonably large sum of money renovating, adding a swimming pool or upgrading the kitchen, it does not necessarily mean you will recover this with the sale of your home. It will depend totally on the buyer and whether they think the extra money you spent adds value to the property. In the case of a recently installed $14,000 designer kitchen, to a buyer who loves cooking and entertaining, it definitely adds value, but if the buyer just thinks it’s a nice kitchen then it may add no value at all. It is important, therefore, to be aware of this factor and remember that ultimately you will still have to price your home to meet the market.
Although this can be difficult, try to look at your home as if you are a buyer. Be realistic. Compare your home sensibly against other properties for sale in the area. Remember what appealed to you (or didn’t appeal to you) about the house when you first bought it.
Initial impressions do count. If your home has the best street appeal, is similar in size, has similar features and is priced the same as your competitors, then this will mean yours is likely to sell more quickly. You may therefore be able to add a bit extra onto the price because of this street appeal factor. Bear in mind however that this may be your only advantage in a slow market where houses aren’t selling readily.
This will play a large part in your pricing. You will get an idea of how the market is going from the news media, talking to real estate people, friends and by generally observing if the houses are selling in your area.
High mortgage rates or a tight economy may influence and slow property sales. In these conditions there may not be any more homes for sale than usual but there are fewer buyers around. In a slow market and especially if you want to sell quickly, your price may have to be lower to attract a buyer. Despite your best efforts and realistic price, a home for sale in a slow market can simply take longer to sell. Do not despair too much if you have to sell at a lower price, however, as it will generally mean you will also be able to buy your next home at a lower price as well. This is provided the market has not changed between selling yours and buying another or that the home you want to buy is in an area where prices haven’t lowered.
The opposite occurs in a fast buoyant market. Realistically priced homes will sell quickly and there are generally more buyers than there are properties for sale. This means if you have a nice home, you can probably hold firm on the price you set or you could set the price at the upper end of what a buyer will pay for a property of your type.
Note: Regardless of what sort of market it is, your home must be in a price range that is acceptable to the market. The maximum number of buyers will be interested in it when you first advertise so it’s important to get the price right first time.
If your price is too low, it will sell quickly. You may have a good reason for doing this but don’t rush to price your home. Take your time, gather the pricing information (present competition and past sales) and think it through.
You may say to yourself, OK, I’ll try it at this high price to start with, I can always come down. This is all well and good and you may get lucky, but overall, if you seriously want to sell your home, get the price right in the first place.
Several problems occur if the price is too high.
The main aim of pricing correctly is to attract genuine buyers to view your property. Get the price right and you should have a steady number of inquiries. Get it wrong and any effort in the other steps to sell your home may be wasted. A wrongly priced home may even help sell your competitors’ homes!
Some real estate people argue that one of the reasons why selling privately isn’t a good idea is that buyers expect you to drop your price by the equivalent amount you would have paid a real estate agent in commission. Why should you? You are the one who has decided to sell privately and you have priced your home realistically. The buyer will look at your home and compare it to others they have seen. If they like it and if it’s correctly priced, then they will pay a competitive price to own it. Buying a home is a very emotive thing and as you are probably aware, emotions often buy the property.
At the end of the day, one of the biggest draw cards of selling privately is that you are the one saving the money. It’s your decision ultimately, but if a buyer uses this as a bargaining tool, just reply that your home is competitively priced in the current market.
The market pays scant regard to what you paid for your home and it’s worth only what a motivated buyer will pay for it now. This works both ways. You may have paid less than $10,000 for it 35 years ago but disregard this amount and sell it for what the market will pay. Likewise if you purchased it for more than you are able to sell it for, then either accept that’s what the property’s currently worth or consider alternative options such as waiting until the prices go up or perhaps renting it out.
The Rating Valuation (RV) replaced Government Valuation (GV). These are updated at least once every three years. These Rateable Values are often used by the local council to enable rates to be charged to the property owner. Several terms are connected with this rating:
Capital Value: This is deemed to be the probable price the property would have been sold for at the date of the valuation. This price does not include chattels such as carpets, curtains and light fittings.
Land Value: This is the probable price the land is worth without any buildings on it and includes development work such as leveling etc.
Value of Improvements: This is the difference between the Capital Value and Land Value. It basically reflects the additional value your house, landscaped gardens etc has on the land.
If you find that some properties are consistently selling above RV, then this may be a useful guide to assist in pricing your home. Overall however, and especially as the valuation gets older, very little correlation can be drawn between this valuation and your actual selling price. In some area’s homes sell consistently above the valuation – perhaps due to desirable schooling etc.
Finally, one of the hardest things to deal with about selling your home may be that you have some emotional attachment to it. Perhaps you were married in the garden or your children were brought up there.
People usually have some fond memories about a home and it can be difficult to deal with these. It is hard to sell anything that personally means something to you and even harder still to look at it as just a financial transaction. When it comes to pricing however you unfortunately can not add any value for this and most buyers will only see the bricks and mortar of your home.
By now you will have a pretty good idea of what the price is likely to be and the last step to consider is the pricing strategy.
Set a Market Price and Expect to Negotiate
This is the most common way to price a home and most buyers will be familiar with this method of purchasing. Almost always, buyers will try to negotiate (downwards!) and in real estate it is widely expected that you do. The price you set will be an amount that meets the market. How much you negotiate downwards will depend on the demand for your home, your urgency to sell, your bottom dollar and your willingness to strike a deal. Most sellers anticipate dropping a bit but not by too much.
Note: The SALE price (the amount you actually sold it for) is different from the SELLING, ASKING or MARKET price which is the price you advertise it for.
Set a Firm Price and Don’t Budge
Another option is to set a firm price. This will usually be done after assessing the market and deciding to advertise your home at a sharp price close to the minimum amount you would accept. This may have the result of attracting more buyers overall because of the very competitive price. Providing the competition has not priced in a similar manner, this can have good results. You may sell faster using this method but it definitely pays to know your competition and expect some people to put in offers below your set price.
Setting a firm market price and not budging also applies if there is a shortage of properties and plenty of buyers. You will however need to assess the market conditions for your area or region. Check what the media are saying and get a firm feel of the market.
You state a price and ask for offers over this amount. Usually this amount is near the minimum you would accept and you would be hoping for a good amount of buyer interest probably in a buoyant market to help push up the price. You would consider the offers as they were presented and either accept the offer or counter offer with a higher price (negotiate upwards). The ideal situation is where two offers compete against each other and this pushes the price upward.
Note: Be careful that you do not understate your starting price in the hope of attracting more buyers and thus more competition. This could be considered as misrepresentation that could falsely lead people to believe you would accept an amount somewhere around the starting price i.e. your starting price is offers over $750,000 when you know that you would not accept anything under $850,000.
Ask for Offers/No Price
If it has been extremely difficult to price your home or you want to test the market, you could consider asking for offers. Buyer interest and their comments will help you firm up on a price. You may however have to advertise it more aggressively and extensively to attract buyers. Often you may get bargain hunters as well as the serious buyers.
Auctions in the past were predominantly held for mortgagee sales and deceased estates but have become more popular. Auctioning now caters for main stream properties that perhaps are difficult to price or are unique in some way. They are also popular for high-end desirable properties in the more expensive parts of town.
An auction date would need to be set and you have to take into consideration your urgency to sell. Generally an intensive marketing period of about 8 weeks is normal. Because you want as many people at the auction as possible, your marketing budget is likely to be quite high (just look at the auctions you see advertised in the newspaper). If you are considering this method, you will need an experienced independent auctioneer who has dealt with property sales before. Ask them for specific advice before committing to sell this way.
Tenders are one of least used choices to sell a property but there are several reasons why you would consider this option.
In a way it’s a silent sale. You advertise the property stating it’s for tender, the tender closing date and that the highest tender may not necessarily be accepted. Generally terms and conditions are laid out and interested parties must submit their offers on specifically prepared forms. A deposit for 10% of the purchase price can sometimes be included but for more information you will have to contact your solicitor. They will prepare the paperwork and advise you on the finer details. Unless you don’t want the publicity, you will want to market your property fairly aggressively to gain competitive tenders from prospective buyers.
This is similar to a tender, a private treaty invites people to offer their best price and the property is marketed normally. The offers are usually made on a sale and purchase agreement with the highest or best offer not necessarily being accepted.
Note - When setting your price, take a leaf out of the retail trade and look at the way it’s done in shops. Price at $899,500 and not $900,000 as phycologically the property is in the $800,000's rather than $900,000's.
Remember you are the one selling your home and you must be comfortable with the price you set.
After all of this, it will be the buyer who determines its real value.
Do you want a book that goes through the selling process for New Zealand? While this website provides a lot of information, the book also provides access to printable forms and more.