brampton.com Homes provides you with the following guide to help you in pricing your home. There are many market forces that will affect your price, such as supply and demand in your area. Read this guide for general information.

The dangers of over-pricing
How NOT to set your price
Determining market value
The comparitive evaluation
Sharing the commission
Room for negotiating

Price Setting Considerations

The dangers of over-pricing

Maybe we're high, but we can always negotiate down or drop our price later... Assuming you're serious about selling, you risk losing a lot of money if you don't price your property correctly right from the beginning:

You will not get many chances to negotiate: why would serious buyers offer on your property when other suitable homes are going for less?

If someone does come with an offer, it's likely to be substantially lower than your asking price, setting up needless emotional roadblocks to a deal even if you should find a buyer willing to pay more than market value, you risk tying up the property for weeks and then having the sale fall apart when the bank appraisal required by high-ratio financing (ie., involving less than 25% down) fails to support the sale price as time goes by and your high price continues to help sell other properties in the area, yours acquires an "unsold" stigma that may eventually force you to settle for less than market value

By now you're totally fed-up with having to maintain "show-home" readiness for people who don't appreciate your over-priced castle; you may even be up against a deadline for the purchase of your next home so you end up listing at a realistic price anyway - but this time with a realtor: you've lost not only a lot of time and the "above-market" surplus you'd been holding out for, but also the realtor's commission, which may represent a substantial portion of the equity you've painfuly accumulated over years of mortgage payments.

Wouldn't it have been better to make your property competitive from the start, get an early sale, pocket some or all of the commission and get on with your life?

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How NOT to set your price

How do you determine a competitive asking price, then? First, in working out what value the market is likely to place on your property, realize that certain factors simply don't apply: the market value of your property has NOTHING to do with:

- what you've put into it
- what you need to get out of it
- how much you've enjoyed living in it
- your reason for moving
- whether you've already reduced the price
- how much time you've got to sell
- what Ethel and George sold for on the other side of town last spring
- that nervous young realtor's guess during his first visit
- what the competition is asking for similar properties.

Market value is an estimate of your property's likely worth to an informed buyer, based on the recent selling prices of similar properties.

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Determining market value

The definition just given indicates how market value is determined: by recognizing what RECENT sales have brought sellers of properties that are SIMILAR to your own in location, age, size, style, number of bedrooms and baths, and amenities. There are several ways you can proceed.

You can invite three or four realtors to provide a comparitive market evaluation. (Let them know that you do NOT intend to list at the present time, and try to determine if they are reputable and successful - hungry beginners might provide an inflated estimate; unscrupulous ones might actually try to sabotage your efforts.) While you're at it, ask them how long homes in your area are currently taking to sell, and what the current spread is between asking and selling prices.

You can try to borrow from a realtor the most recent sales catalogs (as opposed to listings catalogs), then do your own comparitive evaluation (see below).

You could spend a little money and have a professional appraiser provide an independent estimate.

Given that asking price is the most critical determinant of a successful sale, the last approach has a lot to recommend it:

- you get a totally unbiased estimate of value, a powerful negotiating tool, and possibly even an aid in speeding up your buyer's mortgage application;
- the cost of the appraisal is minimal compared to the commission you save upon selling, and if you end up listing, you have a benchmark by which to judge competing realtors' sales pitches (and could no doubt recoup the cost of the appraisal as a reduction in the winning candidate's fee).

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The comparitive evaluation

The comparitive evaluation essentially involves starting with recent selling prices of several properties similar to your own, then adjusting those prices upwards or downwards according to whether they reflect features (square footage, garage size, extra bathrooms, basement development, age, special financing and so on) that are inferior or superior, respectively, to your own property's. (Ask a friendly realtor or appraiser for advice on what values to attach to various features like a fireplace, double vs. single garage, or extra square footage of a given quality and age.)

So, for example, you make the following adjustments if one of the recently-sold comparables, measured against yours, had

- a second fireplace (subtract its sale value)
- a smaller garage (add the value of the difference)
- a new roof (subtract the value of the difference)
- no fence (add the sale value of your fence)

Get the picture? By adding and subtracting for specific differences, then summing up all the changes, you calculate what the comparable property would have sold for if it had been exactly like your place.

So long as the adjustments for a given property don't exceed 10% of its sale price, you've got a useful comparable. Adjusted selling prices for several such properties, falling within a fairly narrow range (discard the ones that don't), indicate what your property should fetch.

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Sharing the commission

Will you have to share the commission with the purchaser? The short answer is PROBABLY. The next question is HOW MUCH?

Consider two identical properties, side by side, same asking price, but one being sold privately, the other through a realtor. As a buyer, which one would YOU offer on? Maybe the one for sale by owner - but only if you thought you could get it for less. Otherwise, why forego the realtor's services in negotiating, helping with financing, and handling closing details?

You can expect to keep the realtor's commission to the extent that you are prepared to do the realtor's job. That means pricing your property realistically, providing the widest possible exposure, acquiring the know-how to handle the selling side of your transaction, and also helping your buyers move ahead with their side of the deal.

That's where we come in. Get your color photos on-line, maximize your advertising, use a professional sign...

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Room for negotiating

What do you want: absolutely the most money for your property, an early sale, or both? None of these will affect the market value of your property, but they will suggest how small or large a "negotiating cushion" you add to that figure.

So will the state of your competition. Check the classifieds, then visit all the homes, similar to your own, that are currently for sale (or subsequently enter the fray) in your area. Take your notebook and get their vital statistics, including, of course, asking price (but be leery of a static price on a property that has remained unsold for a long time - the sellers may not be serious).

Then, when you get home, adjust for minor differences between those properties and your own, just as you did in your comparitive evaluation (above), and you should get a pretty good idea of your ranking in the local competition - something you have to assume most buyers will also be quite aware of!

One thing to keep in mind in setting your asking price: buyers naturally set themselves limits on the range of asking prices they'll investigate, and that range is often expressed in increments of $5000. The search utilities used by online classifieds also set ranges to the nearest $5 or $10 thousand. Therefore, you should favor, if possible, a price like $149,900 rather than $150,500 - the second figure, though only $600 higher than the first, may well place your property just outside the price that several qualified buyers have set for their online or offline search.

In the end, it's just a question of whether you want to finish the race first and get on with your life, or go for top dollar by looking for a special buyer. It's your choice - if you want immediate attention, your saved commission may let you advertise below the market and still end up with a greater net than if you'd listed with a realtor.

Holding out is also a valid option - so long as you have a true market-value benchmark for reference, a clear deadline for reconsidering your price, and a realistic idea of the risks. That means accepting the fact that you are in a competition. As your worthier rivals sell, others will take their place. Ignore that reality, and your friendly neighborhood realtor may end up with the prize that should have been yours.

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