Pricing Your Home to Sell in Today’s Market – The Two-Step Pricing Process
You only get one chance to make a good first impression, and that includes asking the right price for your home. When you first offer your house for sale, everyone is eager to see it. This is when your house will generate the most interest. Overprice your palace and you can enjoy this pleasant process for many months.
Determining the right price is really a two-step process:
First, you have to find comparable houses; and
Second, set your price based on comparables.
Factors Affecting the Right Price
There are no identical twins when it comes to houses; each house is unique. The following are some of the reasons that very similar houses can sell for very different prices.
Location – The old cliché that the three most important things in real estate are: location, location and location is more true than false. This is the only thing you cannot change about your property. Adding a gorgeous new kitchen or Hollywood-style bathroom may add value to your home, but it won’t change its location. This includes things like the reputation of the community, services, and the quality of the local school system.
REMEMBER that the location of your home is one of the reasons you bought it in the first place. If you paid a premium because of your lake view, you can probably expect to recoup that when you sell. If you were able to buy more home for your money because the location may not have been ideal, your buyer will be looking for your home for the same reason.
Competition – The cliché here is “supply and demand”, in this case, the “supply” part. If yours is one of many for sale, supply can keep prices down or at least not allow them to go up to where they would be in a tight supply situation. If yours is the only house in your area that is for sale, the law of supply and demand takes over and you should ask for more.
If you’ve overpriced your home, then you’ll be in the unenviable position of selling other people’s homes. Your expensive house will make the others look like a bargain.
Opportunity: Selling in a buyer’s market is likely to result in a lower price than selling in a seller’s market or in an economy where jobs are plentiful and people feel secure.
Interest Rates: Prices are also affected by mortgage interest rates. When rates are low, you can price your home a little higher because the monthly buyer’s cost will be lower. As interest rates rise, increasing the buyer’s cost per month, the price has to go down in order for the same buyer to be able to afford their house.
Condition: Make your home look as fresh and well-maintained as possible. No one wants to pay a lot of money for a place that looks bad.
find comparables
Take a look at the competition
Search for homes for sale in your area and comparable areas. Try to find houses on lots that are as close to yours as possible.
go surfing
You can do your own CMA (Comparable Market Analysis) using the Internet. Many Internet services, such as www. smarthomebuy.com or www. Zillow.com provides comparables for most homes. One site we particularly like and find useful for finding comparables is http://www.trulia.com. Real estate agents are using it, why shouldn’t you?
Scan local newspapers
They typically have more local real estate listings than the big metropolitan dailies and often run stories about how much the median home price in their area has risen or at least held up in the current economy. This is good background information for your brochure if you opt for fsbo.
call a real estate agent
Why a real estate agent? Because realtors have instant access to all the listings in their area and the expertise to put together a reasonable CMA. Realtors also have access to the prices at which homes in their area actually closed. The closer to today’s time they are closed, the more you can trust the information.
Why would an agent help you if you are not going to use them or are planning to sell on your own? Agents will usually provide a CMA even if you are thinking of being a fsbo (for sale by owner), because they know that most for sale by owners will eventually turn their listing over to a real estate agent and they want to be that real estate agent. turn first. Also, in a buyer’s market, real estate agents have a saying: “It’s the second (or third) agent that really gets the sale” (they’re the ones who get the seller to lower the sales price).
Set the sale price
Let’s say the average sales price of your comparables is $300,000. If the average real estate agent commission in your area is 6% (commission rates are generally negotiable and vary in different parts of the country), that’s $18,000 in gross commissions, if you use an agent and the buyer does too . As a seller, you would get $282,000 minus the fees and costs you are responsible for.
If you are going to try to sell your house as a sale by owner, we recommend that you cooperate with the agents, as this will greatly increase the probability of successfully selling your house in the shortest possible time. You will also have the added benefit of dealing with someone who knows what they are doing. The rate of this cooperation for half of the buyer’s commission is negotiable, but should be between 2-3%. Half of 6% in our example or 3% of $300,000 = $9,000.
Your initial offer price should allow for the ability of your buyer to be represented by an agent. So, take the $300,000 and subtract $9,000 or $291,000. Setting your initial asking price below $300,000, to attract prospects, and above $291,000 to cover possible commissions, is what we would recommend if you go with fsbo.
An initial sale price of $296,900 would satisfy the dual pricing goals of attracting buyers and maximizing their money, while leaving room to pay the buyer’s agent commission, if necessary.
© 2007 Complete Books Publishing, Inc.