Pricing Tips

A Market Analysis

Setting the right price is an important first step in the process of selling a home. Is it necessary to spend $200 to $400 for a professional appraisal of your property before placing your home on the market?

A professional appraiser's opinion of a property's market value is based on the recent sales of similar homes in the neighborhood, and on the square footage and condition of the property. Different appraisers might come up with different figures. Even if all of them agreed on a value, there is no guarantee that you would receive that amount for your property. 

An alternative to a professional appraisal is to ask a professional real estate agent for a written market analysis of your property. This analysis will include information about recent home sales in your neighborhood, as well as how those homes compare to yours. Real estate agents may provide this service with no charge or obligation. If you are still unsure of the value of your home, you may wish to pay for an appraisal.

Comparables

To take much of the guesswork out of your consideration about whether a particular property is a good investment, you can check on the actual selling price of similar homes in the neighborhood.

Some sales information, such as the selling price, the financing terms, and the transaction dates, is public information. Your real estate agent will have record of all recent sales. You can find out how properties have been appreciating, based on actual sales, rather than from the neighbors (they could be wrong!). Driving by comparable homes can give you an idea about how they compare with the property you are considering. Your real estate agent may have seen these homes and can give you additional information to help you make a decision.

Competitive Pricing

You have seen it all over the years--interest rates rise and fall, sales prices escalate and decline. No matter what phase the market is in, it is always important to price your home in your area competitively. How can you price your home with confidence?

The first step is to contact a professional real estate agent for a comparative market analysis. The agent will look at recent sales of comparable homes in your area and give you information about other properties that are currently on the market. By comparing the size, location and condition of your home to the competition, your agent can help you determine how much to ask for your home. Even in an active market, an inflated price may frighten prospective buyers away. A house that is over-priced can take additional weeks or months to sell, and the final sale price may even be lower than if the sellers had started out more realistically. The price is based on market conditions, comparable sales, and your agents years of experience in the marketplace.

Different Markets

If you are going to sell your present home, the market conditions will play a crucial role in determining the asking price. Market conditions change constantly, so it is important that you get solid advice from a real estate professional who is familiar with your specific area.

A good real estate agent will know how quickly houses in your area are selling, and will be aware of other factors that may influence the sale. For example, nearby commercial development, which may create congestion and noise, may also mean a greater demand for housing from people who will be working in the new office buildings. A bus route that cuts commuting time could make your home more valuable, while major highways close by can be an issue for many buyers. The economic conditions have a strong impact on the real estate market. Real estate professionals can help you consider all of the issues and assist you in setting a fair price for your home.

Fair Market Value

What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined? 

The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.

By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.

If the Price Is Not Right

A real estate agent has shown you a house that you like a lot. There is only one problem--the price seems too high. In a situation like this, you can still make an offer that you feel is appropriate.

The real estate agent cannot tell you how much to offer, but he or she can give you information about the selling prices of similar homes in the area. The agent will present your offer to the sellers. They have three choices--they can accept, reject, or counter your offer. 

If the house is a new listing, or if your offer is very low, they may decide to hold out for something better. Sellers frequently build a little negotiating room into their asking price. Prices that are not negotiable at the beginning of a listing period may become flexible as time goes on. If you want to test the sellers' flexibility, make them an offer.

Listing and Selling Price

When calculating what you can afford in a house, don't just look at the list price. The amount you pay for a house is important when you consider your ability to re-sell the house. Today's mortgage options are increasing the possibilities for home buyers, so you should also take a close look at what it will cost you to live in the house.

Your monthly housing cost is the second figure to consider, and that cost is largely determined by current interest rates. Today's real estate market is very price-driven. Homes which are in the best condition and have the most attractive price tags are the ones that sell.

Diverse financing options and competition among lenders are giving many buyers the opportunity to buy a more expensive house or condo than they thought they could afford--and sooner. There are many creative ways to get into a home with a relatively small amount of money. Ask your real estate agent to help you look at today's numbers--you may be pleasantly surprised.

Different Markets

If you are going to sell your present home, the market conditions will play a crucial role in determining the asking price. Market conditions change constantly, so it is important that you get solid advice from a real estate professional who is familiar with your specific area.

A good real estate agent will know how quickly houses in your area are selling, and will be aware of other factors that may influence the sale. For example, nearby commercial development, which may create congestion and noise, may also mean a greater demand for housing from people who will be working in the new office buildings. A bus route that cuts commuting time could make your home more valuable, while major highways close by can be an issue for many buyers. The economic conditions have a strong impact on the real estate market. Real estate professionals can help you consider all of the issues and assist you in setting a fair price for your home.

Fair Market Value

What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined? 

The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.

By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.

If the Price Is Not Right

A real estate agent has shown you a house that you like a lot. There is only one problem--the price seems too high. In a situation like this, you can still make an offer that you feel is appropriate.

The real estate agent cannot tell you how much to offer, but he or she can give you information about the selling prices of similar homes in the area. The agent will present your offer to the sellers. They have three choices--they can accept, reject, or counter your offer. 

If the house is a new listing, or if your offer is very low, they may decide to hold out for something better. Sellers frequently build a little negotiating room into their asking price. Prices that are not negotiable at the beginning of a listing period may become flexible as time goes on. If you want to test the sellers' flexibility, make them an offer.

Listing and Selling Price

When calculating what you can afford in a house, don't just look at the list price. The amount you pay for a house is important when you consider your ability to re-sell the house. Today's mortgage options are increasing the possibilities for home buyers, so you should also take a close look at what it will cost you to live in the house.

Your monthly housing cost is the second figure to consider, and that cost is largely determined by current interest rates. Today's real estate market is very price-driven. Homes which are in the best condition and have the most attractive price tags are the ones that sell.

Diverse financing options and competition among lenders are giving many buyers the opportunity to buy a more expensive house or condo than they thought they could afford--and sooner. There are many creative ways to get into a home with a relatively small amount of money. Ask your real estate agent to help you look at today's numbers--you may be pleasantly surprised.

Making Intelligent Pricing Decisions

Pricing your home is one of the most important decisions you must make when selling your property. Some sellers want to price their home based on the return they would like on their initial investment, while others will base the price on what they need to buy their new home. Location, condition, and accessibility are three other variables that will affect the price of a property.

It is crucial to price your home correctly from the beginning, because it may not sell if it is overpriced. Don't make the mistake of thinking that you can reduce the price later. By this time you will have already lost many potential buyers. The motivation of the seller is a very important factor affecting the pricing decision. The higher the seller's motivation, the lower the price, and low motivation usually means a higher price.

The state of your local real estate market is one of the strongest determining factors when pricing your home. A professional real estate agent will be able to guide you through the pricing pitfalls with a written market analysis that includes the selling prices for similar homes in your area.

Market Trends

Last summer your neighbors put their house on the market and had so many buyers that they were on the winning side of a bidding war. Now you are trying to sell your home, and there's just no action.

The real estate marketplace is very unpredictable. Many factors come into play, the most important being interest rates and prevailing sales prices. In a strong seller's market, prices tend to escalate until they reach a certain point where buyers begin to just say no and listing inventories increase. When this happens, sellers who price their homes at the higher level of previous sales prices must re-think their pricing strategies. If they don't, their homes may not sell. Whether you are buying or selling a home, it is important to remember that the shift from a seller's to a buyer's market can occur very quickly. You can count on your agent for sound advice on what phase the market is in right now.

Market Value

The first step you take when putting your home on the market is establishing the price. A professional market analysis can help you determine what the property is worth. Contact a real estate agent who is familiar with your area to get prices on the homes that are for sale and to see how long they have been on the market.

Your real estate agent will be able to provide you with information about the actual sale prices of homes that are similar to yours. He or she can also tell you about the features that influence the value of each property, such as the number of rooms, the overall condition, and the extra amenities -- home office, finished basement, luxury bathroom, hardwood flooring. 

You can establish a market value for your home by putting all of this information together. If you price your home within 5% of the established market value, it should sell quickly.

Marketing Techniques

When a seller lists a home with a real estate agent, a lot of brainstorming follows. Who are the potential buyers, where do they live and work? How can they be reached effectively with information that will attract them to this particular property?

In addition to advertising each home on the widely used Multiple Listing Service, professional real estate agents employ marketing techniques tailored to the individual home they are selling. An agent will review various buyer lists to find potential purchasers. They will use telephone and direct mail marketing, produce property flyers and advertise on the Internet, in the newspaper, in community publications and in real estate magazines. Contacts will be made to other agents who sell homes in the area to encourage them to show the home to prospective buyers. 

Real estate agents combine pro-active marketing with realistic pricing to generate results for their home sellers.

Maximum Profit

Everyone wants to get the maximum amount possible when they sell their home, but many homes sit on the market because they are overpriced. One real estate axiom states that "the true monetary value of real estate is what someone is actually willing to pay for it". A professional real estate agent determines the asking price of a property by examining the selling price of comparable homes in the area which have closed.

A seller might occasionally be heard to complain that a sales professional "lowballed" their home for a quick, easy sale. However, real estate agents always work to maximize their seller's profit. They price your home based on a careful calculation of the maximum amount you should be able to get (with a little room to negotiate).

If you are really serious about selling your home, work with your sales professional to make sure that it is priced right.

Multiple Listing Service

When you list your house with a real estate agent who participates in the Multiple Listing Service (MLS), you get a lot of service for your money. Depending upon the MLS region, there may be hundreds of participating members.

The real estate agent who lists your home works to get it sold. This is done by marketing directly to home buyers, but an even more powerful tool is marketing your home to other agents who have buyers. Your real estate agent makes all the crucial information about your home available to the other members through the MLS. Information such as your home's location, size, the number of rooms, the style of architecture, what personal property is included, and any other special features is posted. The MLS description will also contain information about any special financing that might be available, showing instructions, and special needs you may have with respect to closing. The MLS is a powerful tool for real estate matchmakers.

Overpriced

In the real estate world, a large group of people are looking to buy homes at any given time. These are the seller's best prospects. This ready group of buyers is wasted, however, if your house is overpriced.

People who have been shopping around and are accustomed to comparing properties will probably refuse to look at your home with an unrealistic price tag. You and your real estate agent may know that you would sell for $10,000 less, but the buyers do not know this. As a result, your overpriced property receives little attention.

Don't be fooled into thinking that your house is worth more than someone is willing to pay for it, or that it's just a matter of waiting for the "right" buyer to show up. Surveys show that the longer a house is on the market before being sold, the greater the drop in price from the listing price when it does sell. The buying public eventually sets an accurate price. An overpriced house just sits on the market, waiting for a price adjustment before it will attract a buyer.

Price and Condition

Pricing a house is one of the most important parts of the marketing process. You want to get as much for the property as you can, but if you set the price too high, you can turn away qualified buyers. Your real estate agent can tell you the selling price of homes comparable to yours. Pricing strategy depends on market conditions, and it is different in a buyers' market than it is in a sellers' market.

If your home is overpriced, the marketplace will reflect that to you. When a property fails to sell in a reasonable period of time, you and your real estate agent should have a frank discussion to determine whether too high a price tag is the reason. Your real estate agent will also be getting feedback from other agents who have shown your home. 

Remember that price is only one factor. Consider ways you can make the property more attractive to show by handling needed repairs, improving curb appeal or making cosmetic improvements. Improve the condition of your home and you will improve its chances of selling.

Sellers Beware

Here is a scenario for sellers to avoid. You contact a real estate agent to list your home and the agent suggests that you might get more for your house than comparable homes on the market. The agent assures you that it only takes finding one person who is willing to pay your price! 

Some agents approach a listing appointment as if they are bidding for your home. The unfortunate result is that you start out with an unrealistic opinion of your home's value. There is often a strong temptation to work with a person who says what you want to hear. An experienced, reputable real estate agent will back up their opinion of your home's value with hard data. The agent should give you information about the listing price of homes that are currently on the market, and recent selling prices of similar properties in your immediate area. 

Even the most heroic marketing efforts won't work on a property that is obviously overpriced, (except in the most exaggerated of seller's markets.) Even if you find a buyer who is willing to pay more than your home is worth, the sale could fall apart when the appraisal comes in lower than the agreed-upon price. Listen to everything, but be careful!

Selling For Top Dollar

When you get serious about selling your home, the chances of your selling it quickly for top dollar will improve considerably if you list it with a real estate sales professional. If you doubt this, consider the fact that eight out of ten homes sold today--more in some markets--are listed with a professional real estate agent.

Listing your home places it on the local Multiple Listing Service that is subscribed to by a majority of real estate sales professionals. Through the MLS listing, your home is assured of getting the widest possible exposure to the market place.

Some buyers shop the home market on their own, but most save time and money by using the services of a real estate sales professional. Ask yourself which homes the real estate agent is going to show the prospective buyers--homes listed on the MLS or those that are not?

If you still want to try to sell your own home, be aware that you will face stiff competition when it comes to attracting qualified buyers!

Selling Tools

After a month of trying to sell your home "By Owner" you may decide to list it with a real estate agent. If you are in this position, you may begin to notice that your agent doesn't market the home the same way you did. You ran classified ads every weekend, but your agent has only advertised twice all month. Even so, there is a lot more interest and activity than you were able to generate on your own.

When your home is being marketed professionally, your real estate agent has many powerful selling tools that make it worth hiring someone who is experienced and competent. Some advantages to hiring an agent are the national and worldwide referral networks, the Multiple Listing Service, and the Internet. We advertise extensively in almost every media available including TV, which may bring in a call from the people who will buy your home. We work cooperatively with other brokers and share information about listings. Communication is the key to a real estates success. Agents use all of these tools to market their listings aggressively to get sales action!

Strategic Pricing

When you decide to sell your home, your next decision is key to the sale--"How much should I ask?" If you ask too little for your home, you could potentially lose money. Asking too much for your home could cause it to sit on the market for a long time.

Your real estate agent wants to sell your home as soon as possible, for the best price. The agent will use a Competitive Market Analysis to determine the price for your home. The sales professional may advise you to reduce the asking price if buyers fail to surface after a certain period of time on the market. 

If you are serious about selling your home, you should take your real estate agent's advice. In case the first price reduction doesn't generate a buyer, another reduction may be necessary. The monetary value of a house is only what someone is willing to pay for it, but if the market analysis is done correctly, you will get the maximum amount--and a timely sale.

The Asking Price

Picture this...

Your house has been on the market for four weeks. There have been a lot of showings but no offers, so you are wondering if you should consider a price reduction. You want to get as much as you can for your home, but more importantly you want it to sell!

This may be the time to have a frank discussion with your real estate agent. While price may be a major factor, it may not be the only consideration. Are you making your house easy for agents to show? Have you completed the necessary maintenance and cleaning so that your property is as appealing as possible? Review with your agent the current market conditions and the prices of other homes in your neighborhood before determining that a price reduction is in order.

Even though your price may be competitive, the marketplace may be telling you that buyers just won't pay what you would like to get. If all indicators point to a price reduction, it is better to do it sooner rather than later.

The Listing Agent

Only approximately 2% of all listings nationwide are sold by the listing agent. When you list your house with me, I will try my best to sell it myself, but more importantly, I will simply get it sold.

Colleagues in my firm or real estate agents who are affiliated with a cooperating broker may sell my listings. This is why I work hard to maintain a reputation for being very professional and easy to work with. I make the homes I list as easy as possible for other real estate agents to preview or show to buyers. 

When you select a real estate agent to market your property, you are hiring them not only for their list of prospective buyers, but for their ability to tap the lists of other people in the business. I constantly lobby among my competition, asking if they have seen my listings, getting feedback and urging them to add my listings to the short lists that they show when they have a prospective buyer.

The Value of Your House

One of the sayings from the "gold-rush" days--"Them that's got the gold, sets the price!"--is also a principle that applies to real estate. We say that a house is only worth what someone will pay for it, even though the owner, the bank, and the agent all have their own opinions about the "market value" of a home. In other words, no sale ever takes place until the buyer agrees with the price.

How can sellers arrive at the maximum "fair" price that buyers are willing to pay? Buyers (and appraisers) make their decision based on comparisons. While shopping for a home, buyers will visit many similar homes in their price range and measure the features of each one against the price. They decide which house offers them the maximum value for the price. Buyers do not expect a home to be a "steal" or dramatically under-priced, but they do expect it to be a fair value.

Sellers must determine the value that their home offers in order to arrive at the right price. The real estate agent will advise the sellers what buyers should be willing to pay for their home, but the asking price is set by the seller.

Value Added Features

A recent study conducted by the National Center for Real Estate Research evaluated the features of a home based on what each contributes to the selling price. 

According to the study, the feature that can most dramatically increase the value of a home is an additional full bathroom, upping the selling price by a remarkable 24 percent. Installing an extra half-bath can add 15 percent to the selling price. A garage, a fireplace and a central air conditioning unit each add a little more than 12 percent to the home's market value. A laundry room located on the main floor of the home increases its value by 15 percent, while a basement laundry room can potentially reduce the home's overall value. Homes with raised or vaulted ceilings sell for 6.2 percent more than identical homes with standard ceilings. Each extra bedroom increases the price by 4.1 percent. A family room adds 7.3 percent, and a dining room is worth 6.2 percent. A view of the water adds 7.8 percent, but a golf course view is better at 8.1 percent. A home built on the waterfront is worth 18 percent more than the same home in a landlocked location. 

Every real estate market is different, so consult your real estate agent regarding the resale value of your home's special features.

Shirl A Thornton
Shirl A Thornton
Real Estate Professional