How to Get the Price You Want (and Need)

Written By Troy Williams
Last Updated Thursday March 16th 2023

When you decide to sell your home, setting your asking price is one of the most important decisions you will ever make. Depending on how a buyer is made aware of your home, price is often the first thing he or she sees, and many homes are discarded by prospective buyers as not being in the appropriate price range before they're even give a chance of a showing.

Your asking price is often your home's "first impression", and if you want to realize the most money you can for your home, it's imperative that you make a good first impression.

This is not as easy as it sounds, and pricing strategy should not be taken lightly. Pricing too high can be as costly to a home seller as pricing too low. Taking a look at what homes in your neighborhood have sold for is only a small part of the process, and on its own is not nearly enough to help you make the best decision.

The First Thing to Know Is What Your Home Is Worth.

Before you can price your home appropriately, you have to figure out what it is actually worth. Otherwise you’re setting your list price in a vacuum. I’ve put together a pretty detailed guide on determining what your home is worth on my site, and you can find it here.

The reason you need to know precisely what your home is truly worth first is to set proper expectations on what you can expect a buyer to ultimately pay for the home. Many sellers will price a home just hoping that they can obtain a certain price, not realizing they have overpriced the home. If they then need to reduce the price because of a lack of interest from buyers, there is a psychological perception that they have then “lost” however much the price reduction is.

The only time you can consider a reduction in price to be a loss is when you have an accurate value and had to take less than that price.

The Market Determines Your List Price Strategy and Ultimately Your Selling Price.

While value is determined by industry professionals such as appraisers or real estate agents using metrics such as recent sales data, property upgrades, location value, and inventory, the list price you select is a part of your marketing strategy.

In other words, once you know your property value, you can decide to price your home at, above or below that value, depending on which buyers you seek to attract. To obtain the highest sale price, you must always choose the best list price, and that is not always equal to the value, because it depends on current market conditions.

The most simplistic viewpoint of these different market conditions is the distinction between a Buyer’s Market and a Seller’s Market.

Buyer’s Market (High Inventory, Low Demand)

A Buyer’s Market is described as one in which there are more homes on the market than there are buyers interested in buying at that moment. In these markets, sellers have to be aggressive about promoting their property and be careful not to overprice and scare buyers away.

To demonstrate this, let’s assume that the true value of your property is determined to be $275,000. However, because there are a lot of other homes on the market, all listed between $275K to $285K, you decide strategically to price the house at $269,900.

This strategy will likely ensure that every buyer that tours a home in your area, they will include your home on the list, because it appears to be the best deal. So your goal in slightly underpricing is to gain an advantage over the competition by ensuring all buyers see your home before they make a decision.

If your home also stands out as the best value, there’s a great chance that multiple buyers will be interested and then compete against each other by bidding the price higher, quite possibly getting you the $275K that your home was worth.

Seller’s Market (Low Inventory, High Demand)

Let’s look at the opposite scenario wherein there are only 2 other active comparable homes on the market, listed for $275K and $280K, and that these properties were just listed in the past 2 days and homes are only on the market an average of 5 days.

In this low-inventory situation the economics of supply/demand are now on your side, and you could list your home for $285,000. Worst case, within another 3 days the other competition should be under contract and you’re the only game in town.

The next buyer that comes through may very well be willing to pay you $285,000 because there are no other homes available and they don’t want to risk waiting for new listings to appear, and another buyer beating them to your home.

A Caveat - Underpricing in a Seller’s Market Can Make You More Money.

While counter-intuitive to the descriptions of pricing in the market as I described above, there is an X-factor you have to consider when pricing, and that is the appraisal.

Regardless of the list price, sale price, or market conditions, most buyers are using financing of some sort, and therefore need to be appraised before the lender will approve the buyer’s requested loan amount.

This means that your sale is often subject to an appraiser’s opinion of value, which the buyer’s lender will trust to inform how much they can safely lend without over-extending. This protects them in the event of an eventual default by the buyer that could lead to foreclosure, where they must liquidate the property and recover as much of their loan amount as possible.

So if your $275,000 valued home is under contract for $285,000 but the appraiser comes in and says its only actually worth $275,000, the buyer will come back to say they cannot pay the $285,000 because their lender will not give them that much. You will be in a position to have to renegotiate the price with them to save the transaction, and you could now very well end up back at $275,000, a “loss” of $10,000!

Let’s say you took the less intuitive approach of pricing at $275,000 and you received 3 offers. You select the highest one, which we assume for this example is $285,000. However in accepting the offer, you let the buyer know that if the property doesn’t appraise for the higher amount, they will be responsible for paying the difference, up to $10,000.

Now when the same appraiser comes in and says the property is only worth $275,000, you don’t have to worry about negotiating a lower price, because you’ve pre-negotiated with the buyer that they will be responsible for the $10,000 out of pocket, because it was their decision to increase the sale price to beat other buyers’ offers.

The Bottom Line: The Best List Price Always Yields The Highest Sales Price

With that said, you need a professional to help you determine the “Best List Price”. If you need a seasoned perspective on pricing and the negotiation know-how to get you the highest sales price, fill out the form to get in touch with me and schedule a free pricing consultation.