There are a number of factors impacting our local market which you should consider when listing your home for sale. First, the amount of home buyers continues to exceed the amount of sellers (shopping within a local market), which means if priced correctly and in proper showing condition, your home should get an increased level of traffic. However, for the past 3-4 years buyers have been conditioned to take advantage of “today’s bottom pricing” meaning they are all bargain shopping. Homes had been discounted due to the plunge in market values, bank owned properties which needed work, and short sales that would test even the most patient clients.
Today, there is an increase of home buyers that no longer want to put in a load of sweat equity, and would prefer to buy a ready-to-move-in home at today’s still discounted pricing, but without having to wait for short sale lender approval.
In order to properly attract these buyers, you want to start with a well thought-out marketing plan that will adapt to your needs (why you’re selling, when you want to move, finding a new home), broadcast the physical state of your property (Ready to Market or needs work) and be properly priced according to your local market. Buyers are price sensitive and as they go on showings, they will compare the pluses and minuses of many homes, including yours.
So how should you price your home?
1st, perform a 9 Month CMA (Comparative Market Analysis) based on Closed, Contingent, and Active homes within a 1 mile radius of your home. (Ask your Real Estate Broker for this). Once you have the report, the greatest weight should be given to what actually CLOSED. This is where the money is, and active properties do not hold the same value. Once you have a good understanding of the comparables, there are two ways to look at the pricing of your home, Traditional and At Market Value (I call this “The Sweet Spot”). Lets explore the differences, and the pluses and minuses for each.
Traditional Listing Price:
The listing broker has run comparables of similar homes within a close geographic region (1 mile), compared the improvements of the subject property (that’s your home) against the closed, contingent and active properties and proposed listing the home at a higher than the market value price with anticipation that buyers will want to negotiate the price down.
PROS: The seller feels like they have the chance of getting more money for the sale of their home but listing it higher and hoping that buyers will come in with offers close to the list price, and settle on an offer within 10% of purchase price.
CONS: Homes listed above market value often require a longer market time for buyers to review all options before making a decision. There is a negotiation factor involved subject to buyer and seller coming to an agreement on price, often involving 1 interested buyer within a given window of time. If no offers are extended within a given amount of time (14-30 days), then the listing broker may call to suggest a price reduction, and will continue to do so until activity increases. Increased market time may project a false message of poor property condition or lack of other buyer’s interest.
At Market Value (“The Sweet Spot”):
The listing broker has run comparables of similar homes within a close geographic region (1 mile), compared the improvements of the subject property (that’s your home) against the closed, contingent and active properties and proposed listing the home at, or just a couple of thousand dollars below market value price with anticipation that more than one buyer will see the value and create a multiple offer situation, often resulting in a sale over list price.
PROS: Property fits the “good deal” profile by being priced according to the market and is often accompanied by many simultaneous showings from various real estate firms. The heavy traffic of showings feeds on it self as buyers find themselves greeting other buyers, and often supporting the competitive nature of wanting something other’s want. The activity also gives the impression that if others want it, then it must be good, and so buyers are willing to pay over list price to get it. This activity often creates a multiple-offer situation where more than one party makes an offer for the same home with superior terms, shorter closing times and higher dollar amounts.
Agents that know how to properly manage a multiple offer situation will maintain a professional level of communication, voicing dead-lines, and documents needed for consideration of the process. A due date is set to give every party involved a final chance to upgrade their offer to a “Highest & Best”. Often, the seller has many options to choose from, doesn’t have to undergo a negotiation, has received strong offers within a short window of time, and often above list price.
MYTH: “Listing at market value is like a fire sale, and tells buyers to take advantage of the seller.” Buyers are competitive and know the market value due to the many showings and offers placed, and possibly lost, if too low.
CONS: This pricing strategy is most effective in a market where the number of buyers exceeds or is equal to the amount of sellers on the market. If there are less buyers than sellers on the market an “At Market” pricing strategy will still likely prevail over traditional, however the number of showings and offers will be impacted by the number of buyers looking for your home. Also, keep in mind that in order to have the best results, your property must be listed according to its condition. Fixer upper according to fixer upper values, and updated according to updated values. Sellers looking to list their fixer upper based on updated home values will not have the same results. Consult your real estate agent (or Four Daughters Real Estate) for more details as all homes and local markets are unique in nature.
Have a great end of 2013 and please let me know if you have any questions.
Mario Bilotas, Managing Broker, Four Daughters Real Estate