Pricing, pricing, pricing!

The very first question we’re asked after “How much do you think my property is worth?” is “How long will it take to sell?” We often say that if you’re getting no showings, it’s your price. If you’re getting showings and no offers, it’s the property (at that price). Simply put, pricing is the most important thing. The more accurate your pricing, the faster you will sell. It dictates how long your home sits on the market, whether it sails through a loan process and how picky your buyers will be about the condition of your home.

Pricing above the market.

At the end of the day, a good realtor works for you! You have the final say in what your house is listed for. However, if you think your property is worth more than everyone else’s in the neighborhood, be prepared to own it for a while. The market is littered with overpriced properties, because people get attached to their homes and put sentimental feelings into their price point. Prices then start stair-stepping down as days on the market increase. In some cases, the cost to the seller of owning the home during the seller’s pricing “experimental” period exceeds the discount that would be required to sell it. Crazy, huh? Nope, we see it all the time, and almost every seller starts the listing process by thinking theirs will be the one case where overpricing actually works. It won’t work. It also just delays your success.

An example:

Your home in a community is priced much higher than what nearby homes sold for. Nobody can figure out why, because its features are similar to most other homes in that community. Nobody calls for a showing. You are frustrated. The listing Realtor calls other Realtors and potential buyers and holds open houses. The listing Realtor markets the home like mad. Still nothing. The Realtors who noticed the property when it first hit the market have seen it come to their Inbox so many times, they don’t pay attention to it anymore.

You’ve lost the attention of the market, and there is a vague feeling now that there is something wrong with the property (which there isn’t). Now, it is hard to counter the impression that the house is sitting on the market for reasons other than price. Even if the seller reduces the price to be fair, the reduction is not large enough to capture the attention of the market again. The home does not sell until there is a significant additional price reduction. The terms of the contract require many repairs, and you are now so happy to have a buyer at all, that you agree to make all of them. Meanwhile, you have been paying insurance, property taxes, HOA fees and a mortgage during this process. It would have been much less expensive to price the property accurately in the first place.

If you find a buyer to pay an inflated price and that buyer needs financing, you’ll also need to hope the appraiser for the buyer’s lender agrees with your price. Appraisers work strictly with market data and not with emotion. Sellers understandably get attached to their homes and value them more than an objective appraiser. The learn more about pricing your property, you can read our blog post here!

There is so much more to say on this topic, but you can see why we counsel sellers to price to the market. It’s not because we want a quick sale. It’s simply a better strategy.

We hope this post can give you a good idea on how to effectively price your home. To keep up to date with new blog posts, real estate tips, and more, follow us on Instagram here!

Find out what properties like yours have recently sold for in your area of town. In residential real estate, this is called a “comparative market analysis” or CMA. In commercial, you’ll do a “market study”.

It pays to price accurately, because your price signals the market about how realistic you are as a seller. Your price will also determine how long you sit on the market. If you over-price, be prepared to sit there.

It pays to understand what is and is not comparable to your property. Let’s use your home as an example. The more similar your home is to a property you compare it to, the better “comp” (comparable) the other property it is. It will be more persuasive in arguing your home’s value. Choosing “comps” is a big part of pricing a home to sell it.

Let’s say you live in a 2,800 square foot home with a Diamond Devco “Island Aire” floorplan. It has these features:

In the northern part of town
In Blue Sky Subdivision
Built in 1998,
On a 60’ x 130’ lot,
Directly next to a busy street, and
3 bedrooms and 2 bathrooms.
It does NOT have a swimming pool, but the yard is fenced.

We know that your friend just listed her home with the exact same floorplan for $800,000, but she lives in a completely different area of town, and we will ignore it. Why??? Her home is:

Not sold
In the southeastern part of town
In the Ocean View Subdivision
On a cul-de-sac
Built in 2001
On a 60’ x 100’ lot, and
It does have a swimming pool.

Your friend’s home might have the exact same floorplan, but she lives in a different area of town, her home is newer, and while she has a smaller lot, she does have a swimming pool, which also gives her an upward bump in value. Also, she has not yet sold her home. The market will tell what her home is worth in her market when we see what a buyer agrees to pay for it, but we don’t know that until it sells.

We are over-simplifying, and there is a lot more of a science to choosing comps, but generally, we look for:

Properties in your subdivision or neighborhood (even better if they are on your street).
That have sold within the last year
With a similar size, similar age and similar size lot
With similar features

We do look at properties that are listed but have not yet sold, but only to set our sales expectations. If comps say that the homes like yours recently sold between $500,000 and $550,000, we would expect a similar sale. The market might have moved up a little (like 1% or 2%) if the market trend is upward, so, we’ll give you that. However, let’s say 2 similar homes in your neighborhood were just listed yesterday at $485,000 each. That would indicate a downward trend. Unless your home is far superior, it would be hard to get $500,000, much less $550,000. If you insist on listing high, you’ll sit there for a while. We would recommend pricing in line with other homes that are available to the same buyer in the same area.

Remember - even if you get a contract at a really high price, you will usually face an appraiser who will do what?? Look at the comps! If the comps don’t support your price, the buyer won’t be able to finance the purchase, and you’ll sit with it.

Accurate pricing is an art. We understand that most sellers are mistrustful of agents in this regard. Sellers believe all agents want is a quick sale and price low to the detriment of sellers. Maybe that is true for some bad apples. Normally though, Realtors get a bad reputation for selling out their customers that way. An experienced Realtor who shows you credible market figures and has a well-founded basis for his or her opinion, is actually providing valuable market insight to help you achieve your goal of selling!

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Before You List Anything- Part 2- How To Speed Up Your Sale

EVERY SELLER WANTS

MOST SELLERS GET

Pricing, pricing, pricing!

Pricing above the market.

An example:

Before You List Anything! Part 1- What's It Worth?!

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