Price it Right

Let’s say I have a home on the market and it is priced for $500,000 and I offer it to you for that price, take it or leave, you have to make a decision right on the spot or miss out. Would you be interested? Surely, you would want to know more details before making that kind of decision. Where is it? (location). When was it built? How was it built? Is it connected to electricity, gas, water, sewer, etc? Now, I have that same house on the market, only this time it is listed for only $100 and you still have to make a decision on the spot. What is your decision now? I’ll bet you wouldn’t hesitate to buy a home for only $100 where you had other questions come to mind at the $500,000 price. The $100 home could be in the middle of a freeway but for that price, it would be worth the extra unknown risks.

When you are considering listing your home and you sit down with your potential agent, in nearly every single appointment, price will be discussed along with other marketing strategies. As I ‘ve mentioned in other articles, it only takes three things to sell a house. See my other post Selling Your Own Home? You May Want to Reconsider (But here are some tips if you do)

1. Price it right

2. Tell enough people about it

3. Keep it ready to show at a moments notice

Since we are focusing on price in this article, Here are the 3 “C’s” to consider to price the property correctly.

Comparable sales or comps for short comprise of similar homes that have sold recently. The more similarities that the comp has to your home, the better indicator as to what your home may be worth. Generally, I’ll search for homes that are the same style, (detached single family, condo, townhome, 2-story, ranch, tri-level, bi-level) as the home that I’m trying to determine a good starting range. Then I’ll identify homes that have sold within the previous 3 months and are located within a 1/2 mile radius. Generally I’ll look at sold listings but also like to take note of which homes are currently under contract and active on the market. I like to find at least 3 good comparable homes because that is the minimum that an appraiser would do as well. If there aren’t sufficient comps within the 1/2 mile, I’ll look further out but keep the styles as close as possible.

Closed sales are the only comparables that provide hard data for pricing however, it is also a lagging indicator. When looking at comparables, we will also look at homes that are active on the market (your competition) and homes that are pending. People want to get good value for their money. If two homes were identical in every way but one was priced $10,000 lower. The lower priced home would sell first every time. Therefore it is important to know and track what the other active homes in the area are priced at.

If the home you are trying to sell has significantly more deferred maintenance than the comps in the neighborhood, it is reasonable to expect a potential buyer to discount what they would pay for the property. In most cases the discounted price is more than what the actual repairs would be. As a seller, you’ll need to decide whether you have the time and/or the resources to renovate/update the home before going live on the market. In most cases, updating and renovating kitchens and bathrooms will get you the most bang for your buck. The price of the kitchen renovations can also easily get over $10,000 with even a modest size kitchen. Your agent should be able to help you decide if it is worth it or not to renovate.

This section encompasses a wide range over all of the other factors that influence the price of the home. Is it a buyer’s or sellers market? How many homes are currently on the market? How much demand is there? Where are mortgage interest rates at? How easily are people able to obtain mortgage financing? How it the economy doing? As the seller, what is your timeline? Where is it located? (Yes, it is still a circumstance) There are so many of these circumstances that you’ll want to discuss with your agent so they can strategize and price the home to give you the best chance at your desired price.

Feel free to comment below if there are any circumstances you fell I’ve missed and would like to see in a subsequent blog article. We would love a chance to earn your business and help you determine the best possible price for you.