Home Seller Tips, Part Three – Pricing (and Reality)

This is part three of my three part mini-series on how to sell your home for the most amount of money in today’s market. (If you missed them, click here for part one and click here for part two). This part deals with the number one most important issue when it comes to selling your house – pricing – as well as the issue of reality.

Pricing

In most cases, the reason why a home does not sell is pricing. If it’s not priced correctly, it will simply sit on the market collecting dust while other properties that are priced correctly sell all around it.

Folks, you can not fool today’s home buyer nor a good Buyer’s Agent.

In today’s day and age, there is an abundance of information available to every home buyer with an internet connection (which around here is pretty much everyone). Buyers can get information on recent sales, historical sales, tax records, assessed values, market trends, market statistics, photos, virtual tours, videos…the list goes on.

Buyers can and will quickly and easily figure out what the fair market value of your property is. If/when a buyer sees that you are priced above market value, they are typically very quick to pass on even seeing your property and will look at another similar property that is priced more attractively. Even if there are no properties similar to yours on the market, if a buyer thinks yours is overpriced, they will wait until one comes on the market that is priced well.

Even in the off chance they have no internet connection or don’t do the research themselves, any Buyer’s Agent worth their weight in salt will let them know whether a property is priced at, below or above market value based on the current market conditions. The Buyer’s Agent will share their opinion with their buyer clients (that’s part of what they’re getting paid to do) and once they do, the buyer will most likely pass on your property.

Tip: Once a buyer gets a list of properties that meet their general criteria, they first sort them by what they look like based on photos, virtual tour, etc. Then they sort again based on price. The remaining properties are then put on the “to see in person” list. If you are not priced correctly, you won’t make that list.

How do you price your property correctly?

Check the comps. Find out what similar properties have sold for within the last 90 days. This will show you exactly what buyers are willing to pay for similar properties. And also find out what similar properties that are currently under contract were last priced at before they went under contract. That will give you an idea of which asking prices are leading to offers from buyers.

Once you have the comps in front of you, add/deduct value based on what your property has versus what the other properties have/do not have. For example…if you have an in-ground basement while the other property has a walk-out basement, you need to deduct for that.

Another example…if the other property has an unfinished basement and yours is finished, that could be a difference of tens of thousands of additional market value for your property (depending on the square footage of the basement, quality of build, etc).

Check the current market conditions. Are prices appreciating, declining or steady? Is the home inventory increasing, decreasing or steady? Is buyer demand on the way up, way down or steady? Is the inventory mostly traditional resales, foreclosures or short-sales and what percentage does each type of property comprise? How many properties similar to yours have sold past month…3 months…6 months? And the list goes on…

Market conditions is very important when it comes to pricing correctly. This is where an experienced and knowledgeable Realtor who has his/her ear to the ground comes in. If they are on top of the market and what’s going on, they can spit out accurate statistics, advice and guidance at a split second even if you wake them up at 3am from a dead sleep.

Check how much competition you have and do some recon. In many ways, this is a battle. Your competition is made up of other sellers with similar properties that have their homes on the market as well. Home buyers that come across your property will most likely come across your competitors’ properties too. If a buyer feels that your competitors’ property is a better value than yours, they will probably place on offer on their house before they place one on yours.

This is what us Realtors call, “Selling your neighbor’s house” – a buyer comes across your house, then sees your neighbor’s house, yours makes theirs look like a better deal so they buy theirs. Congrats! You’ve just helped sell your neighbor’s house and lost a potential buyer for yours. This is the last thing you want to do – especially in a declining market.

Important: If prices are declining, you will probably get less for your home now that your neighbor has sold their house. And the less your neighbor accepted for their house, the less you’ll get for yours (see paragraph 3 above).

And do some recon. Have your listing agent take you through your competitor’s homes so you can see them with your own eyes and in person. This will help you see exactly how they compare to your property and you will know what buyers are comparing your home to and how, which helps tremendously come negotiating time.

Reality

You have to be realistic. If the comps and market conditions all point to a market value between$500K and $520K, don’t list it at $575K. Your property will just sit on the market until A) you lower your price or B) market values appreciate $55K to$75K (and we all have a pretty good idea of how long that could take).

You may say, “But I want $575K!” or “I think my home is worth that much regardless of what the comps/you say.” That’s great.

But it doesn’t matter.

Your home is worth what a ready, willing and able buyer will pay for it today. And the comps illustrate what a ready, willing and able buyer has been willing to spend on a property such as yours in the last 1 to 90 days. If you are not willing to sell your home for what it’s worth in today’s market, you may not want to list it for sale in the first place.

On a related note…If you figure out that what you owe is more than what you’ll make from the sale of your home based on your property’s current market value, you have three options,

1. Don’t sell it.
2. Do a short-sale (click here for more on that).
3. Foreclosure (I strongly urge you to avoid foreclosure at all costs for a variety of reasons).

So there it is folks…my three-part mini-series on how to get the most money for your home in today’s market.

If you have any questions or concerns about anything, click here to contact me at any time. And if you’re considering selling your home and/or are interviewing several Listing Agents in the area, I would love the opportunity to interview with you and see if we would work well together.