How to Price your Home and where to go from there
Yesterday I went into detail on how you can prepare yourselves and your home for listing. I would like to back up just a little bit before we proceed to negotiating offers and go into a little more depth and detail regarding how to price your home, and how to manage adjustments.
With the internet at everyone’s fingertips and Real Estate focused websites like Zillow and Open-door out there, it is easy for everyone to browse listings and do a certain amount of research. Be wary though, as a lot of the information on the internet can be inaccurate (shocking, I know). Zestimates are only as accurate as the data they can access; meaning they may be outdated or incorrect and may not include any upgrades or improvements made by homeowners. Since they can only use public information, they may not have all the facts.
When a Real Estate professional is making comparisons, they have a better understanding of the value of neighborhoods and the trends in the current market, and access to more detailed and accurate information. Zillow may see that a house on one side of town is the same size, age, condition etc. as a home on the other side of town so may assign them the same price range but would not be aware of the value held by one over the other due to its proximity to a more desirable area, or overall condition of existing homes in the immediate vicinity.
Let’s work on an example together, shall we?
On Zillow, a home is listed as 4 bd, 2.5 ba 2,440 sqft, on a .53-acre lot, Built in 1998. It lists the value at $316,602. Zillow does not offer a formula, or side by side comparison with other homes to inform you on how it arrives at this value.
When I evaluate a home, I look at the closest comparisons that have sold in the last 3-6 months. I can view how long the house was on the market, if the price was adjusted and the actual final price the home was sold for, from which we can determine the actual value that the buyer found in the home. In this case I will compare it to 3 homes in the same neighborhood.
1. 4 Bds • 3/0 Ba • 2833 sqft – Nicely updated kitchen and bathrooms, partial basement, awkward lot. Price per sq ft $127, total price $359,900 (Initial List Price: 359,900! Priced Perfectly!)
2. 4 Bds • 2/1 Ba • 3004 sqft – Renovated, updated, desirable lot, price per sq ft $139, sold price $420,500 (Initial List Price: 449,900, -$20,000 less than asking)
3. 4 Bds • 2/1 Ba • 2391 sqft – closest in style to floor plan and updates, nice lot, pool. $139 per sq ft, final sold price of $332,900 (Initial List Price: 334,900 – remarkably close!)
Based on these comps and the condition of the example home, I would recommend pricing between $130-$135 per square foot. Putting List price between $317,200 and $329,400. It is at this point that I take a closer look with the homeowners on the condition of the components of the home. Roof, HVAC, appliances, any updates they’ve done to the home, or any issues they are aware of that could affect the price.
We would also discuss their urgency. Do they need the home to sell ASAP? Or do they have some time to see how the market reacts to a slightly higher price? If you need it to sell quickly the best way is to slightly underprice it. You can negotiate during the counteroffer to ensure you do not incur any additional expenses for the closing since it is already at a great price. If you do not have urgency and can take your time, you can afford to gamble a little bit more and price it higher as you wish. Keep in my though, pricing the home too high off the bat could cause some buyers to never even consider the home. It might never even make it into their search results, or they dismiss it as being too expensive. Then when it sits on the market too long and the price drops, it makes them wonder what is wrong with it. It is often a tough decision to list the home at less than what you feel it is worth but listing at or even slightly below what the market is calling for could cause greater demand and possibly multiple offers that could drive the price back to where you originally wanted it.
Once you are confident you have your list price set correctly, your Realtor can start to market your home. Don’t be afraid to ask questions about HOW your Realtor will market your home. A licensed Real Estate Agent will have the ability to post your listing to the Multi-Listing Service in your area, and of course there are a multitude of other options to market your home. I will talk some more about that TOMORROW!
In today’s market, a correctly priced home in good condition in a desirable location should get a solid offer within a week. Woo hoo!
But what happens when you aren’t getting offers?
Depending on market conditions, this time period can change, but after a significant amount of time without an offer, it may require the seller to take another look at what they are asking, and how they are marketing the home. Have there been showings but no offers? Or have there been no showings at all?
Revisit the comprables you discussed with your Realtor and consider lowering your asking price. Take a closer look at the current trends. Is your home in a desirable area? Are other homes in your area selling quickly? Look closer at those to see what differences exist between your home and the homes in the area that have sold recently. Are there significant updates? Does there seem to be a more desirable style or floor plan? Is your lot a little smaller or bigger than others in the area? All these items need to be considered. You may need to invest a little more sweat equity or invest in more repairs or you may have to be willing to lower your asking price. As I have mentioned before, the value of your home is determined by the market demand.
Perhaps try thinking about this – why are you moving? What don’t you love about your home? Those reasons are likely the same reasons you are not getting offers on your home and the only way to make the home more desirable would be to make it more affordable.
Another aspect to consider is how easy it has been to schedule showings at your home. Have you had to turn down any showings due to scheduling issues? It is important to prioritize showings whenever possible. The more buyers that see your home, the more likely an offer will materialize.
The moral of this story is, when pricing your home, put aside your emotions and drill down to where buyers will find value in your home.