Should You Choose The REALTOR Who Suggests The Highest Asking Price For Your Home?

Submitted by Jasmina on Tue, 2007-07-31 00:48.

Free OREA book How to Sell Your Home You may be tempted to do so and sometimes that’s appropri­ate. But first find out how the proposed price was calculated. What methods were used to assess your home’s potential value in the current market? How was your home compared to others that have sold recently and to those currently for sale? Does this suggested price match your selling objectives?

Determining Your Home’s Asking Price

Your decision about the “asking price” of your home—the price your Realtor will put in the Listing Agreement is one of the most important you will make in the selling process.

If you price your home too low, you may cheat yourself out of money you could have earned on the sale. Ironically, some potential buyers may not even view your property if the price is too low—on the assumption there must be something wrong with the home.

If you set your price too high, potential purchasers may pass it by in favour of more reasonably priced homes. Others may figure you won’t accept a large decrease in price, so they won’t bother to make an offer. A few may even be reluctant to offer a much lower price for fear of embarrassing you or themselves.

Setting too high a price can also leave your home on the market for a long time, which could give it a bad reputation among potential buyers. If you then decide to drop the price, you may end up selling your home for less than had you priced it reasonably in the first place. The reason? Having your home on the market for a long time can weaken your negotiating position, since buyers may assume you are now under pressure to sell and will bargain accordingly.

The object, then, is to choose a price that is neither too low nor too high. But doing so is a complex procedure involv­ing a comprehensive understanding of the market and an objective opinion of your home’s saleability. Realtors are experienced in doing this research and providing the guid­ance you’ll need to make the best-possible decision.

What is “Market Value”?

Homes have different types of values depending on the needs of those doing the evaluation. For example, an insurance company estimates a home’s “replacement value”—the amount it would cost to rebuild after a fire or other disaster. Replacement value will usually exclude the value of land.

Financial institutions often hire professional appraisers to assign a “lending value” to a home. This represents the price a lender could expect to receive if forced to liquidate the property quickly in the event of mortgage default. As such, lending value is often a conservative estimate.

For the purposes of resale, most sellers base their asking price on the estimated “Market Value” of a home; that is, the highest price a property will bring in a competitive and open market under circumstances conducive to a fair sale. These circumstances include:

  • Informed buyer and seller who are aware of the alterna­tives available to them through access to reasonable market information.
  • Rational, prudent behaviour by buyer and seller, which assumes they will each act in their own self interest.
  • No undue pressure on either party, meaning neither requires a quick or forced sale, nor is the seller willing to wait an unduly long time to find a buyer.

In other words, market value is the price your home should sell for if it is placed on the market for a reasonable length of time and receives proper exposure and promotion. Experienced Realtors have the knowledge and expertise needed to calculate your home’s market value and help you set a realistic asking price that matches your sales objec­tives. By the time you’ve interviewed two or three candidates in making your Realtor selection, you should have a very good idea of the right price for your home.

Calculating the “Market Value” of Your Home?

Your Realtor has good knowledge of the social, political and economic factors that can influence the market values of homes in your neighbourhood.

  • For example, if there’s a trend will work in your favour, or is it weakening?
  • Are interest rates dropping or rising?
  • Are people worried about their jobs, or are employment and buyer confidence high?
  • How many homes like yours are you competing with, and how many are selling?
  • And perhaps most important, what are your sales objectives?

Talk with your Realtor about all of these consid­erations.

As you weigh these factors, remember also that it’s nearly impossible to replace the initial flurry of interest and activity a new listing will generate. When your home is put on the market, Realtors in your area will want to see it right away to determine whether it would be appealing to any of the buyers they’re currently working with. The first open house and advertising for a newly listed home will also usually attract a lot of interest. So it’s critical to establish an asking price that takes the best advantage of these initial marketing activities.

Source: OREA book How to Sell Your Home

This OREA (Ontario Real Estate Board) book will walk you through the real estate process; provides checklists, work sheets, loads of tips, hints, and advice to help ease the stress of selling real estate. Many of the books available on real estate buying and selling can be complex and confusing, but not this practical guidebook. The many terms used in real estate are explained in simple, easy-to-understand language. It will show you how to find and work with a REALTOR, as well as with a lawyer and other professionals who will generally be part of your real estate team.

Make no mistake though; this handy book can’t replace the knowledge, skills, and expertise of a REALTOR.

Request your FREE

  1. How to Sell Your Home guidebook by calling OREA at 1-800-563-HOME!
  2. Comparative Market Analysis (CMA) Report which in essence is the current Market Value of your Home. CMA is an indicator of what today's buyers are willing to pay for your home. Click here to request it Online!