Considerations in Pricing Your Home
Get the Right Professional
Considerations in Pricing Your Home.
Having a professional on your side is imperative to accurately price your home. Hire a Realtor who knows your market. The knowledge it takes to know the local real estate market takes years of experience. Gaining this knowledge requires a full-time commitment from your real estate agent. To help you understand the real estate sales process, I’ve identified seven key points that you need to keep in mind when selecting a real estate agent and working with that professional to properly price your home.
Values Vary by Neighborhood
Just because Denver is on fire, doesn’t mean Grand County is also. County-wide real estate sales look different if one examines individual neighborhoods. Winter Park recovers sooner than Granby. You want someone who has been in or sold several homes in your specific neighborhood. You need to know what similar homes have sold for in the last 6 or 12 months.
Don’t Over-price
It may seem that the only risk in over-pricing your home is that it’ll take longer to sell and eventually you’ll find that perfect buyer who’s willing to pay your price. While it may seem counter intuitive, a seller can often get the highest price by slightly under-pricing the property. Under-pricing may attract several buyers all looking for the best deal. These buyers will bid against each other and drive the sale price up.
Over-pricing drives potential buyers away and may cause the seller to reduce the property below market value, just to sell it. That makes buyers hesitate. They think: “What’s wrong with this house” or “The seller really needs to sell, so lets low-ball the house.” In either case there is a real possibility that the property will sell for less than it would have if it were priced correctly in the first place. Just as a footnote, the seller should consider the carrying costs while the house is on the market. This includes taxes, interest on the mortgage, utilities and taxes.
Timing is Everything
You want to start off on the right foot, the first time. Your exposure will be the greatest the first week of the listing. You will have the highest number of internet inquiries. You are new to the market and people get excited. Be priced right when that excitement is high and you will get showings.
Price Reductions
These are caused by two factors: initial over-pricing or substantive changes to your local real estate market. The information in this document should help you to avoid over-pricing; however, it can still happen. If your house is priced properly, then there must be a market change that has caused your house not to sell. These include interest rate increases, general economic problems (think 2007-2008 recession) or several well-below market sales of similar houses to yours. A professional real estate agent will track these changes and help you identify when and how much to reduce the selling price of your house. Moreover, the agent will work within the real estate community to get the right word out. This will avoid the concern of “what’s wrong with this house.”
Don’t Forget the Appraiser
The buyer fell in love with your home and offered a price that was above market value. The appraiser has to prove to the lender that this is a good investment. If the appraiser can not justify the sale price, the seller will have to reduce the price, or ask the buyer to bring additional cash to make up the difference. Most buyers will not or cannot come up with the additional cash.
Don’t Rely on County Assessors’ Data
It’s out of date by at least 6 months and can be out of date by up to four years. Further, home owners generally don’t protest low home values, because it would only increase their taxes.
Don’t Rely on Zillow
Zillow uses an algorithm that includes Boulder sales comps. While I’m sure every seller would like to get Boulder prices, it’ll never happen. This is because we’re really close to Boulder, if you’re a bird.
