Objectivity is key when pricing a home correctly; it’s what helps you differentiate between market value and emotional value.
Fair Market Value
A Realtor’s goal should be to price your home as close to fair market value as possible. The determination of fair market value involves concrete factors such as availability, demand and local market trends.
When it comes to putting a price tag on your home, the decision needs to be made objectively. It will take into account the above factors, along with any major features that set your home apart, such as location, condition, and extras like a swimming pool or finished basement (if these are unusual in your neighbourhood).
Often, there will be a bit of pent-up market demand from buyers who are looking for a home in your price range but haven’t found “the one” just yet. For this reason, a home priced at fair market value commonly attracts immediate attention and can be expected to bring in offers that are fairly close to list price. The closer you can come to pinpointing that price, the better chance you have of selling your home quickly and for the best possible price.
If your listing generates a lukewarm response or nothing at all, you know you’re not there yet.
Emotional value is subjective. It’s based on factors that matter to you as the homeowner, but are of little consequence to a potential buyer. Measures of emotional value include how much you paid for your home or what you still owe, what your home costs to maintain, or how much you need for your next move.
As a seller, it’s tempting to set a price based on emotional value. Some overprice in hopes of “testing the market” for a buyer who is willing to pay. But here’s the thing about pent-up demand: these buyers have done their homework and know what their money can buy. Unless a home is truly extraordinary, it’s unlikely there will be takers (though they may generate a low-ball offer). Overpriced homes tend to be overlooked by buyers and can sit on the market for an extended period of time. They may even end up costing sellers extra money in the long run.