Six Steps To Pricing Your Home
And a home that’s initially overpriced statistically tends to ultimately sell for less while taking a longer than average number of days.
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Here six steps to help you figure what your home is worth or Click HERE If You Are Looking to Buy a Place
Of course you love your home, it’s configuration, layout, location, size and finishes… You bought it! But the real question is how much will a ready, willing and able buyer be willing to pay for your home? Buyers won’t be swayed by how much you paid for the home, how many memorable moments you and your family shared in the home, how much cash you need for the down payment on your next home or how much time and money you’ve invested in your home’s hardwood floors, fresh paint, lush landscaping or other improvements.
If your neighbor’s home is very similar (even almost identical) and for whatever reason the neighbors are willing to sell their place for less than most would think is appropriate then until the neighbor’s place is sold your place will be worth less! While finding identical homes, with identical locations, in identical condition rarely happens most buyers do have the ability to select between similar homes in similar locations with similar features and configurations. Sometimes your home may not be able to compete which may mean you wait for the ‘low priced’ competition to be sold or it may mean delaying listing your home. But it’s not realistic to think that a Buyer will pay more for your place over similar ones if you can’t justify to a buyer’s agent and the buyer why your place should be worth more to them!
If you must sell then having tough competition places even a greater emphasis on making sure your place is marketed well and shows the best that it can! That means the home is clean, well decorated and properly staged. Even things like the temperature must be correct which means it should be warm on cold days and cool on hot days!
While you may say you don’t care about the competition, and you are willing to wait even 6 months or longer for a buyer who agrees with your perception about the value of the home… even if you can find that buyer… ultimately if the home does not appraise out for the sales price than usually the only way to keep you moving to the closing table means you as the seller will lower your price to what the appraiser has set as the value.
Start with at least two real estate agents who visit your home and give you their opinion of its likely selling price. Ask for a ‘comparative market analysis’ (CMA), which shows the prices of comparable recently sold homes, on-the-market homes and homes that were on the market, but weren’t sold. The on-the-market homes are the “competition” for your home. Ask the agents why each home was included in the CMA and whether any other comparable homes were eliminated from the CMA. Price recommendations are not an exact science. If it was then you would not need an Agent!
If the suggested list and sales price vary widely than have a 3rd CMA completed by another agent. But keep in mind that some agents will tell you to under-price your home in hope of sparking a bidding war. Others will suggest a flatteringly high price to ‘buy’ your listing only to demand a price reduction a few weeks later. The best agent can justify the sales price to you. If they can’t defend their price to you then don’t expect them to be able to justify it to a buyer’s agent who wants to buy it for less!
Go to open houses in your neighborhood and try to make an impartial assessment of how those homes compare to yours in terms of location, size, amenities and condition. Assuming all the asking prices were the same, would you buy your home or someone else’s? Great agents will not only suggest that you do this but will offer to take you to see all of the competition including when new places continue to come on the market after yours is listed. Being familiar with competition will help you digest showing feedback from buyers who are comparing your place to the others they are also viewing.
The average price per square foot for homes in your development neighborhood should not be the basis for a list or sales price but should help validate the CMA’s completed by agents in Step 2 above.. Keep in mind that like the a CMA even the price per square foot is not an exact science and various methodologies can be used to calculate square footage. Generally when I calculate price per square feet I do not include basement square feet unless it’s a fully finished walk out and I don’t count 3rd stories or finished attics the same as first and second floors.
Are home prices in your area trending upwards or downwards? Are homes selling quickly or languishing? Will your home be on the market in the spring home-buying season or the dead of winter? Are interest rates attractive? Is the economy hot or cold? Will you be selling in a buyer’s market or a seller’s market? Is the local job market strong or are employees fearful of staff reductions? Ask agents to share with you the Market Absorption Rate which is an indicator of how many similar homes are available contrasted with recent demand for homes of this type and price to determine how many months of supply there is for homes like yours. The greater the amount of supply the longer the likely time to sell your place and the more of a buyer’s market it is for buyer’s looking to purchase a place like yours.
Incentives help make your place stand out from the competition. If you can be out quickly then make that known although you have to be careful that what you are offering as a benefit is turned in to a perceived ‘need to sell’ While any buyer can ask for seller’s assistance many buyers don’t know that. So, if you have a first time home buyer place to sell then stating that you will pay 2,000-3,000 in seller’s assistance towards closing costs may increase the attention you get from these buyers. However buyer incentives won’t change what a home is worth or what it appraises for. So, if a home is only worth $200,000 adding another $3,000 of incentives and selling it for $203,000 could mean the difference in the home appraising or not appraising.
Keep in mind that when you market your home you are marketing to buyers and to the buyer’s agents. Making sure that the buyer’s agent commission is equal to other similar listings could mean the difference between you place being the bride vs. the bridesmaid if everything else is equal between two properties, the agent’s client asks the agent which they think is a better buy/investment/value, and your commission is less than what the other seller is paying. In fact, one strategy is to gain more Agent attention by paying a higher commission to the buyer’s agent or by offering a ‘commission bonus’ when the property is under contract or closed by a certain date.
The bottom line is the more creative and flexible you can be in meeting the buyer’s needs, the more success you’ll have in pricing your home to sell in the time frame that you desire..