How to Establish an Ask Price

Even though you may not consider it that important, setting the right ask price is arguably the ...

Most Important Step

...in the entire home selling process. You may believe that it doesn't matter much, that a prospective buyer can simply offer whatever they want, that your ask price is irrelevant. Well, it most certainly is very relevant.

It can make the difference in not only how long it takes to sell your home, if it even sells, but also what final sale price it actually achieves.

Price too high, and there's no interest from buyers. By setting the listing price lower, but still too high, you may get attention and showings. But nobody makes an offer because they still feel you're unrealistic when compared to recent sold properties and comparable active listings. Remember that buyers now have the benefit of their own agents for professional advice, just like you did with your listing agent. Set a list price too low, and you could conceivable under-sell your home.

Much depends upon current market conditions in your area.

In a strong seller's market, a popular strategy is to deliberately under-price the listing, and delay entertaining offers until a particular date, maybe a week or so later. This works well in hot seller markets, or for special properties. It encourages multiple bids, which may result in a sale price in excess of your listing price. But beware - without the correct circumstances in place, it could back-fire. You need an expert trustworthy REALTOR®, a unique property in a prime area, and a seller's market.

Call it ...

The Perfect Storm

During a buyer's market, or a balance market, the ask price is still important as it means attention, or not, from the buying public and their agents. A reasonable asking price sends the clear message to REALTORS® that you're fair, that you've been educated by an experienced agent. This encourages buyer agents to show your property.

The traditional method employed by most REALTORS® is to simply agree with their seller's demands for an unrealistic listing price based upon a home owner's subjective opinion of value. The REALTOR® accepts their client's ask price, hoping for a miracle. Having done so, the agent is probably already planning the first of possibly several price reductions. Or at another level, the agent may secretly hope to generate buyers from the lawn sign, possibly selling them into a competitor's listing.

When personally put into this unfortunate situation, if I agree to even accept the listing, I tell my seller that I'll be recommending a price reduction two weeks hence. I suggest they be prepared. They just want to try it for awhile. So - I try. But I've been through these situations countless times, and my prophesy usually comes true.

The problem with this strategy is that that seller, and their REALTOR®, miss taking advantage of ...

The Most Active Time Period

... in the selling process - the first two to four weeks.

At any given time, there are always buyers searching for homes. Thanks to the fantastic exposure provided by the internet, they've already discovered, and possibly viewed, all the current listings in their target area - and ignored them. They're now checking for only new listings. And if your listing appears in their, or their agent's search window, and they feel it's over-priced, they just ignore it too.

It's not like the old days before the introduction of the internet, with its multiple photos and virtual tours. Years ago, buyers physically viewed virtually everything before making the decision to either offer on or reject a listing. And during those old days, when they did offer, it was often very low. Standard procedure.

Nowadays, most listings sell within five percent of asking price, sometimes very close, and occasionally over the listing price.

So, if your list price is too high, you'll have to reduce it. Regrettably, you've missed the best time. Now, your listing is becoming stale. A buyer often asks how long a property has been available. If the answer is two weeks or less, and they like it, they often make a reasonable offer. If they feel it's been around too long, they'll wonder ...

Why No One Else Wanted It

If they're still interested in making an offer on a stale listing, count on it being low.

Listings that have been around for months on end, with numerous price reductions, or none at all, will often sell at a price below that which might have been obtained if the seller had accepted reality in the first place by setting a fair ask price. Or they expire unsold. There a lot of expired listings.

Generating an offer early in the game usually translates into a ...

Higher Sale Price

... because the seller's in a far stronger negotiating position. And the buyer will want to avoid competing with another buyer.

So, once you establish a reasonable expectation for market value, then determine an ask price that will attract the attention of not only buyer prospects, but also the buyer REALTORS® who are watching for new product.

And by no means should you base your asking price on what your neighbour is asking for their home. It may be over-priced. Think independently. Determine an estimate of fair market value first - then set your asking price.

Be Objective

Put yourself in a buyer's shoes. Set a fair ask price, and move on with your life. Besides - the market is rarely wrong. It's unlikely to give you more than fair market value. Period.

To learn more about selling your home, and the importance of setting a reasonable ask price, click here.

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