When compared to real estate, no other industry caters to such a diversified audience of personalities and preferences. Every house has its own character and function. Every person has different values and requirements. This is why selecting a property prices can be so challenging. In all fairness, trying to determine the exact price of a property without expert assistance is not an easy task. In fact, asking price within the industry is based on the duality actual value and desired value. A vast majority of home buyers do not comprehend that the act of setting an asking price is typically an invitation to negotiate.
Balance is Essential When Pricing a Home
Investors will undoubtedly factor in the time and sweat spent to transform the property when asked to name an asking price. And this is completely understandable. Wouldn’t you agree?
On the flip side there are hordes of sellers who now believe that the best way to approach is to set the asking price below the market in the hope that they will be able to sell at the highest possible price and the fastest pace. Theoretically, this is a sound method. By pricing low you are increasing the chances of inspiring a bidding war. And with some luck and skill on your side the competition could end with the final price above market value. No matter the asking price of your home; You should be prepared to see a 10% gap between the sales price and your asking price.
How Is All of This Affected By Comparables?
Comparables (“Comps”) refers to other similar (comparable) real estate. Last year the average Arizona home was selling for 5%-10% less than original asking prices. This is is a sizeable difference. Using comps, it is much easier to choose a realistic asking price, as well as settle on a sales price. The actual starting point that so many sellers in today’s market use to set their prices are the comparables.
Speaking plainly, choosing an asking price and an expected sales price is not an exact science. It is an estimation, based off of similar properties in similar areas with similar features and what has happened with them, recently. Far too many variables exist, interacting with a variety of influential factors. However, by using comps and getting expert opinions you can mitigate your risks and time on the market and maximize your return on investment.