house price

My advice? Don’t choose your own price.

My advice? Don’t choose your own price.

It’s very tempting to want to choose your own price. There’s all that information out there on the web, real estate portals, town market updates, newspaper articles and much more. There’s also your friends and the neighbor who sold their house five years ago in a different market. Usually when people call me in to list their home they have already scoured all the information available and come up with their own idea of what the price should be. It’s been my experience that sometimes they can be right, but most times their price is not right for current market conditions.

Your friends and neighbors, when they find out you are selling your house, will all have an opinion … which is usually based on some anecdotal data they heard from a third party or based on their experiences. They often are much higher than your house is really worth, but it makes you feel good to hear it and you soon start believing it yourself.

Next is the elephant in the room, the zillow “zestimate”. According to a recent article in the Boston Globe, a zestimate is not the price that your home is really worth. They quoted Cory Hopkins, Zillow’s public relations manager for data, who said” a zestimate is a starting point and should be used in conjunction with guidance from local real estate professionals who understand the market and know your property.” Bottom line, until a computer algorythm like this can go inside your home and compare it with similar homes it has also been inside, the results it predicts are suspect.

As I like to say, pricing is 50% science and 50% experience. The data available to the public is usually about a month behind the market, because “sales” don’t get recorded until the money and deeds actually change hands. This can often be 45-60 days after a property has accepted an offer so while in slow markets this is fine in hot markets you might be leaving money on the table if you’re using stale data. Local professionals are right on top of the market to today, so they know what has sold and approximately for how much well before the data becomes public. This is power to be used for your advantage.

To set your price I use a clearly defined process that is repeatable and yields consistent, accurate results, (my list-to-sale ratio is 96%, industry average is 92%) here’s how it works:

First, I have to walk through your home in order to put a price on it. This is usually a half-hour exercise, but is very important to the process.

I then use the information I collect, such as updates, additions and improvements and compare your home with other houses that I have been inside with similar fits and finishes. If I can’t find ones I have been inside I often make arrangements with the realtors or homeowners to do a quick tour to be sure that I’m really comparing your house to comparable properties. No amount of clicking on internet sites can replace this experience.

Once I have evaluated your house versus the comps I will make adjustments for many variables (that matter to buyers looking for a house like yours), such as: living area square footage; lot size; number of bedrooms and baths; garage spaces; and location. After the adjustments are made most people stop and decide that this is what the price should be.

The last step is to position your house within the market. A house is worth what somebody will pay for it and what somebody will sell it for, we call that a “meeting of the minds”. So, it is important to know who is out there looking for a home like yours and who your competition will be. One useful market statistic is called the Absorption Rate. This compares the number of properties currently on the market with the number of properties sold within the last year in a given price point. If there are more properties than buyers it’s a buyer’s market and if there are more buyers than properties it’s a seller’s market (we like those).

Once this analysis is complete I will give you a price that I think a buyer will probably pay for your home in today’s market.

In summary, don’t chose your own price, leave that to a professional … Mike Hunter.

Your Home is Worth How Much?

Your Home is Worth How Much?

Your home is very special to you – no doubt it holds many warm memories, but buyers who are looking at your house have just looked at lots and lots of them and your home is just “the  fifth one they saw today”. Unless it’s a perfect match, your home is no more special to them than numbers 3 or 18 were. Therein lies the challenge when thinking about pricing your home.

In very basic terms: Real estate is a commodity, not a product.

With a product the manufacturer makes something, then establishes the price it will sell for. They advertise it, and the public either buys the product or not at that price. Think clothing, TV’s or furniture in a store.

With a commodity, the sellers set an “asking price” and then buyers decide their “bid price”. The buyers assign their own value based on two things: one, what is happening in the market … prices fluctuate daily and are influenced by supply and demand and two ,what are their perceptions of the value of the exact facts, features and benefits inherent in that commodity. The potential buyer’s perception of value determines what your property is worth to them. Think auction.

Also, with all commodities and especially real estate there are two market trends – either appreciating or depreciating which depend on the laws of supply and demand. When fewer properties come on the market than go off, there is a shortage of inventory and prices go up … this results in an appreciating market. When more properties are coming on the market than are being sold, there is an oversupply of inventory, and prices go down … this results in a depreciating market. We are currently in a flat or slightly appreciating market, just having snapped out of seven years of depreciating market.

Your potential buyers are comparing your home to similar ones in your town as well as similar towns. They are visiting other homes for sale that are comparable in size, style, condition and location. They see what your competition is asking, and are also working with their agent to see what comparable homes sold for in recent months. Putting all of their observations and data together they are determining their opinion of the fair market value of your home. Hopefully you too have done some research and have come up with a reasonably similar fair market value and price your home accordingly.

The bottom line is: your buyer is an educated consumer and in real estate both sellers and buyers have to agree on the fair market price of a property in order for it to sell. If you price your home based on your emotional evaluation of how “special” it is, and not what it is worth compared to similar ones in the eyes of a buyer you will lose time and money. Yes – money. A recent study by Zillow, the real estate portal, suggests that overpriced homes actually sell for less money (when they do eventually sell) than if they had been priced correctly from the start.

Of course your home is priceless to you, but it’s the only thing you have to sell … to the home buyer it is not the only choice out there. Because of that you’ve got to be priced at the point that buyers agree with your positioning as it compares to all the others you are competing against. If your thinking of selling, give me a call I can help you sell your home, my pricing accuracy is over 97% list to sell ratio (without any price changes).

%d bloggers like this: