“Sold for under asking” doesn’t quite have the same ring to it as “sold OVER asking” does. Does it!? But it’s not always what you think. In fact, sometimes selling for under asking can even mean you’ve done better on your sale.
What does it mean to “list at market value”?
Your agent provides you with a Comparative Market Analysis (a “CMA”) for your property, essentially it should include information on a handful of close comparable sales from your neighbourhood, and a fairly tight range of value for your home as it is, if sold in today’s market.
Then, you decide your pricing strategy. If you decide to “list at value” then you’re deciding to list appropriately with respect to the market value of the home vs. exceedingly low to entice multiple offers. Typically, you take the market value and list at a number slightly above it in order to leave room to negotiate. What you’re really doing is “listing slightly above market value”.
For example: according to the CMA your agent provides you, your home is worth between $1,250,000-$1,275,000. In this case, an effective list price might be $1,279,000 or $1,289,000. The goal is to end up with a final sale price within the market value range for the property.
What if we list it at exactly what it’s worth and just tell everyone we’re firm on price? We won’t budge!
It just doesn’t work well. The process of negotiating involves a little back and forth between each side. If you are expecting $1,250,000 for your home, please do not list it right at $1,250,000! If you do, you are almost guaranteeing that you will never see that number in an offer. Placing a small premium on the target sale price is the best way to establish a correct listing price.
Why bother negotiating if everyone knows it’s planned like that?
Because Humans! Humans are not wired to just pay what they’re told to pay. Particularly when purchasing a home. An experienced agent will handle all of the negotiating for you, but part of that is preparing you to be negotiable yourself. This goes for buyers too: if you’re starting low, be prepared to come up. As a seller if you’re starting high, be prepared to come down.
But sellers be careful! If you start TOO high with your list price, you’ll be off to a very rough start.