By Tari Ede, REALTOR, GRI, MRP, CNE, ABR, PSA
One of the most important pieces of advice that a Realtor® can provide sellers when they are ready to sell their home is how to price it. Pricing a home to sell is one of the most misunderstood aspects of real estate, and yet, it’s the most important first step in the home selling business. Regardless of how well maintained, how much you paid for it, how many upgrades it has or how beautiful it is, it is going to be a tough sell if your home is not priced correctly. It’s easy to understand why a seller would want at least what they paid for a home when they sell it. After all, isn’t a home supposed to be an investment and shouldn’t that investment always appreciate? In actuality, your primary residence is not an investment and the sale price is dictated by the current market conditions and what a buyer is willing to pay for it.
So how do we determine a probable sales price of a property? We complete an analysis of the recent comparable home sales in the neighborhood, then take a look at the local and regional market and current trends and compile it to provide you with a Comparative Market Analysis (CMA). This analysis helps to determine the market value range, which is the most likely price that a property should sell for in a competitive and open market. In addition, in order to determine a probable time frame for the sale, we can also analyze the absorption rate to determine if the conditions indicate a buyers, sellers, or balanced market. A buyer’s market might suggest that you price your home in the lower end of the range because inventory is high. In a seller’s market, inventory is low and pricing in the higher end of the range can be a good strategy. Remember High School economics? The more there is of something the less valuable it is and the less there is of something, the greater the value.
Your home, the subject, is compared to a recently sold (within 90 days) property (comparable or comp for short) that is most similar to yours within the same neighborhood with adjustments made for differences such as square footage, features, age, number of bedrooms, bathrooms, and lot sizes. There may be no need to make adjustments if the comparable properties are very similar. Your competition (a currently listed similar property) should be considered when setting the list price as well. Think like a buyer. If you have two homes that are virtually the same and one is priced $20,000 more than the other, which one are you going to make an offer on?
Myth: Pricing my home higher than the CMA indicates, will protect me from selling too low. Buyers can always make me an offer if they are interested.
Truth: Buyers are looking for homes in their price range comfort zone. If it’s priced too high, you may have lost the opportunity to make that most important first impression. Today’s buyers are savvy enough to know the value of a home and will potentially overlook your home if they feel that you are asking too much for it. Remember, the advent of online home shopping has changed what buyers know and how buyers buy.
Myth: If I price it just right, I may leave money on the table.
Truth: A well-priced home generates an incredible amount of urgency on the buyer’s part. A home that is priced right will have many showing requests within the first 2 weeks and could result in multiple offers and potentially, a sale over the list price. Buyers are also less likely to try to bargain with you over small issues because they know that they are competing with other buyers.
Myth: Your outdated home should sell for as much as the home next door that was recently remodeled.
Truth: Buyers will consider what it will cost to remodel their new home to today’s standards and will deduct accordingly when formulating an offer. When updating your home, consider what value and enjoyment YOU will gain from the remodel- not what it will garner you in a sale 10 years from now.
Myth: My home is nicer than almost any home in the neighborhood, therefore, it should sell for more than any other home.
Truth: Your home may be nicer- in your opinion, but that’s just your opinion. The fact is that your taste may differ from other’s tastes and what you find of value may not be what others value. For instance, you may be on a corner lot and you consider this to be a more valuable lot. Buyers may not want their backyard exposed for all to see as they drive by and so, they don’t find the corner lot to be of value.
Additionally, if the property is overpriced and the buyer is financing, if it does not appraise, the lender will not agree to fund the purchase. You may end up negotiating the final sales price down if the buyer cannot or will not pay the difference between the contract price and the appraisal price.
The goal in Real Estate is to sell your property for the most amount of money in the least amount of time with the least amount of inconvenience to you. As Listing Agents, we want to sell as high as possible, after all, we want you to be happy with the service and what you walk away with so that you are sure to refer your friends, neighbors and relatives to us. We know there is a common misconception that we want to price it low for a fast sale. In actuality, we want to price it right for the market conditions, making for a less stressful transaction and the most money possible given the current market conditions.
If you have any questions or are interested in selling your house or buying a new home, it would be our pleasure to meet with you to assist you in developing a plan to meet your real estate goals.