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Question: We listed our home for sale. The asking price is $429,900. It turns out that a lot of people are interested in the property. Should we increase the asking price?
Answer: Everyone is familiar with real estate listings that say “new price” or “fresh price” – expressions that tend to mean a lower asking price – something designed to get more buyers in the door. However, you've got buyers, what you don't have is a written offer with the price and terms you want.
Let's imagine that you go to a grocery store and there's a big sign that says “oranges on sale this week” – you might have more interest in buying oranges if you know the prices are lower. If the sign said, “get your oranges today, prices are up” you might not be in such a hurry.
Unless you have a listing agreement that says otherwise, and since there is no full-price offer on the table from a ready, willing and able buyer, you can certainly increase your asking price. If a local real estate broker lists the property, you should speak with the broker and first get his or her advice. Many brokers – but not all – will remember the last time they bought oranges and suggest that increasing your price will reduce buyer interest and maybe scare off potential purchasers. In the end, the decision is up to you.
However, since you have a lot of people looking at the property, the best strategy may well be to do nothing.
What you want are multiple offers and a bidding war that will drive offers above the listing price. With a bidding war you'll have leverage and a better chance to find the offer you want.
We must assume that the original listing price reflects the value that seemed reasonable when the property was listed based on recent, local, comparable sales. The listing number might be a little high or a little low because we all see value differently, but basically the offering price must be reasonable otherwise you would not have agreed to it.
This raises the question of what happens if you get a really good offer, an offer far above the asking price. Will the buyer pay cash? If not financing will be needed and the property will be appraised. The lender will base the buyer's loan amount on the sale price or the appraised value – whichever is less. If the appraisal is less than the sale price either the buyer will have to come up with more cash, the sale price will have to be reduced, or the deal will fall through.
Peter G. Miller is author of "The Common-Sense Mortgage," (Kindle 2016). Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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