The listing price is the amount for
which you are offering your property. It is usually slightly higher
than the market value. You can almost always expect offers to come in
below your listing price. The idea is to meet somewhere in the middle
during the negotiation process, and yet not fall below the market
value.
As a general rule of thumb, consider setting your listing price at
about 5% more than your bottom line. This will give you some room to
negotiate, but will not turn away prospective buyers. Remember, your
bottom line is the minimum amount that you will accept for your home.
Ideally, your bottom line will be in the same range as the market
value. What you owe on the property and how much profit you stand to
make should not influence your listing price, nor should this
information be discussed with prospective buyers.
If you’ve correctly set your listing price, you should begin to
generate interest as soon as you begin marketing. If several weeks go
by and there is no interest in your property, you may want to
reevaluate your marketing, or take another look at how you’ve
determined your listing price.
You will also want to be realistic with your expectations. If you
decide to sell your property during the slow months (October through
January), you shouldn’t expect an overwhelming turnout. Also, if an
honest evaluation of your property reveals unattractive features (i.e.
located on a major street, high crime rate in the area, across the
street from an industrial complex, adjacent to a freeway, etc.), you
should expect it to take longer to interest a buyer. Even real estate
agents have difficulty selling such properties. In these instances,
you might consider lowering your listing price to attract a buyer, in
which case you would be dipping into your profit. The amount you
stand to save by selling by owner will give you this increased
flexibility.
A word of caution is in order when considering your listing price.
Frequently, a property that is priced too high remains on the market
for an extended period of time after which the seller must lower the
listing price. In some cases, the listing price is lowered two or
three times. This sends the signal that the seller is either
desperate or highly motivated to sale, or unsure of the properties
actual value. A shrewd buyer will try to take advantage of this
uncertainty and the seller usually winds up making less on the sale
than if listing price had been set more realistically.
Do not try to trick buyers. If you set your listing price according
to what the market will bear, you can expect to sale within a
reasonable amount of time and for a price that you can live with. You
also won’t risk wasting your advertising dollars on a property that is
incorrectly priced.
