When selling your home, it’s no secret that setting a fair listing price is essential for quickly attracting a buyer. But in today’s strong seller’s market, which has seen home values hit record highs in many areas and bidding wars often drive the sales price above the listing price, sellers may wonder just how ambitiously they should price their homes. While your realtor will be able to offer the most up-to-date guidance for your current market, here are a couple pricing strategies to keep in mind.
- Safeguard against low appraisals. In areas where home prices are rising quickly, it’s not uncommon for properties to receive appraisals that are lower than the price agreed upon by the buyer and seller. In fact, the National Association of Realtors reported that in the first quarter of 2021, low appraisals were the leading cause of terminated contracts. Since mortgage companies generally will not lend more than a home’s appraised value, the problem in this situation is that either the buyer needs to offer more cash, the seller needs to agree to a lower price, or the two must meet in the middle in order to save the sale. Fortunately, there are some steps that sellers can take to protect themselves against low appraisals. For example, you can choose to only accept offers that guarantee the sales price regardless of the appraisal, or only accept buyers who are prepared to put at least 20% down.
- Consider recent comps. Identifying the sales prices of similar homes in your area that have recently sold will help you and your agent choose the optimal listing price for your home. For the most relevant data, focus on properties located within a mile that have closed in the past 90 days and have similar defining characteristics—such as the same number of bedrooms and bathrooms, and square footage within 20% of your home.