Setting a Realistic Asking Price for a Home

By James Woodard

September 5, 2016 5 min read

One of the most important decisions the owner of a newly listed home must make is what price to ask in the listing.

If it's too low, the property will probably sell fast but at a price lower than its market value. If it's too high, it may sit on the market for a very long time. Then it might finally sell, after reducing the price several times.

Many owners follow the advice of their broker in determining the price. That's often good advice, but keep in mind that the broker makes no money until a sale is consummated. A low price will expedite his commission payment.

The best service the broker can provide is to prepare a market analysis report, listing all comparable homes sold in the area within the past six months or so and how much they sold for. This will give a good perspective on the right price for a home.

A report from the National Association of Realtors includes some valuable tips:

Seeking the asking price just below a round number — that's the best technique for pricing a home for sale, according to new research published in the Journal of Housing Research. Researchers found that buyers are more drawn to a house priced "just below" at, say, $199,000 than to a house priced at a rounded number like $200,000.

` "Our study suggests that by using the just below pricing strategy sellers can price their home slightly higher without driving away potential buyers," says Eli Beracha, one of the study's author. "As a result, they end up selling their house for more."

"Indeed, researchers found that such a 'just below' pricing strategy yields a selling price that is about 2.5 to 3 percent higher — or $5,000 to $6,000 more — on a $200,000 house compared with a rounded pricing listing strategy."

Q: Are mortgage applications increasing?

A: Yes, applications rose by 2.8 percent at last report from the Mortgage Bankers Association.

The report also noted that the refinance share of mortgage activity increased to 63.5 percent of total applications from 62.4 percent the previous week. The adjustable-rate mortgage share of activity decreased to 4.5 percent of total applications.

Q: Are home values continuing to rise?

A: Yes. National home values appreciated for the 48th straight month this July, according to the Zillow Real Estate Market Reports.

Home values are up 5 percent over the past year and have been consistently climbing since August 2012, but still remain 4.7 percent below peak, which was hit in April 2007 when the median home value was $196,600.

Portland, Dallas and Denver reported the highest year-over-year home value appreciation among the 35 largest metros across the country. In Portland, home values rose almost 15 percent to a median value of $334,900. Home values in Dallas and Denver appreciated 11.9 and 11.3 percent, respectively.

Q: What is seller-financing, related to selling a home?

A: Seller-financing means the owner-seller is willing to carry the financing themselves via a special note or contract. In other words, the seller takes on the financing role usually handled by a bank.

This practice is becoming more popular. It makes a purchase more flexible and attracts more prospective buyers. It also expedites a sale and tends to encourage an offer at the asking price. There are, of course, risks involved that should be considered.

Q: Do very small homes have appeal in today's market?

A: Yes, and that appeal is growing. Here's a portion of a report from the National Association of Realtors:

"Tiny houses are trending bigger nationwide. Interest in small-home living among the public has gained momentum since the recession, and made some Americans crave a simpler, less expensive way to live, according to U.S. News & World Report."

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at Jim Woodard's email: [email protected] COPYRIGHT 2016 CREATORS.COM.

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