5 Considerations When Pricing Your Home
Pricing a home correctly is typically the most challenging part of listing a home for a seller. To successfully sell a home, an accurate price must be in place to compliment a solid marketing strategy, as outlined in our Marketing Your Home guide. Study after study points to the fact that the longer your home is on the market the less your home is worth. That is why pricing your home accurately from the beginning typically will generate increased activity from buyers and higher offers. Contrary to popular belief buyers do not always offer less and pricing higher does not get you more.
Nowadays buyers and buyer agents have access to the same information as Realtors do and are not fooled by an overpriced home and will typically steer away from it if it stays on the market too long at the same price.
1) Comparative Sold Properties– Analyzing recently sold comparative properties is one of the best ways to identify a fair market value for a home. Typically it is best to search a radius around the property and look at similar homes that sold within the past 6 months. Depending on how dense or rural an area you are in; will help indicate how far you will need to go in your search. For example if you are close to Boston you may only need to search in a radius of about a ½ mile or maybe even a ¼ mile. If you are in a more rural area you may need to search a larger area like a mile or two.
2) Under Agreement Date of Sold Properties – This is as important as number one but it is often overlooked by home sellers and agents. It is necessary to look at the date that the offer was accepted because you have to consider what the market was like at that time. If inventory was very low that may have driven up the sale price because buyers likely competed for the home. Every year in May and June home sellers see what their neighbors’ homes sell for and they want to price their homes for the same amount or sometimes even more. Many of them do this and their home does not sell and they don’t understand why. It is because by May or June there are more homes on the market and buyers have more to choose from so they are not willing to pay as much. Anthony explained this in depth last fall on the Fox 25 News.
3) Comparative Active Properties- Looking at other homes that are for sale in the area is a great way to see where your property would fit in and compare to the others that are currently on the market. The key to getting your home noticed and sold is marketing and attractively pricing your home to beat the competition. Many sellers compare their homes to the other active homes and want to price above them. If another home is on the market that is similar to yours and it is not selling you should not list your home for that price or above. Instead you should consider listing lower than them to give yourself the competitive advantage!
4) Current Inventory- since Real Estate is all about supply and demand this is also very important. This consideration is very similar to #3 because it is again about competition. When inventory is low sellers typically sell for more as we explained in our List In the Winter and get a Higher Price blog. When inventory is higher homes do not sell for as much because buyers have more selection and can take their time searching. Ask your agent how inventory is not only in your neighborhood but in your entire town and even the abutting towns. The higher the inventory the more choices buyers have and the less they will be willing to pay.
5) Market Condition- Since the beginning of the real estate recovery in 2009 the market has continued to improve but there have been setbacks along the way. For example last fall in 2014 the market hit a slow down. This caused November home sales to be down 3% compared to 2013 and additionally November 2013 was not a great month either. If you have to sell your home in a time like this all the same considerations above apply but you will likely have to get even more aggressive with your price in order to sell. Another option if you do realize that the market has slowed down is to wait it out and list when things pick up again. The only risk here is if the downturn continues and prices begin to decline you might end up getting even less in the future.
What if you think you price it right but it still does not sell?
When pricing a home the goal is to price it so that it sells. However even the most realistic home owners and best Realtors out there occasionally overprice a home. Generally speaking you will know if your price is right within three to four weeks of being on the market based on activity and feedback. If you don’t have good activity in a month like April that is a strong indication that your price is too high because there are tons of buyers out buying in April. If you do get showings but most of the feedback is that the price is too high then you do have to consider making a price adjustment. Sellers often struggle with this because they feel like they are giving up money. The fact is you are really not giving up any money because you don’t have it yet. Deciding how much of an adjustment to make can be tricky but we have found our target pricing model to be very accurate over the years. It helps you zero in on how much of an adjustment to make and we have found it to be very helpful over the years. We call it our Target Pricing Model. To see it click here.
I was helping my mom sell her house while in California. Her house had been on the market for 2 years with 2 other realtors, and I was a bit worried being so far away. But the Lamacchia Realty Team made the transaction very smooth. Anthony and John went to bat for us and smoothed out all the potential wrinkles along the way- everything from getting a contractor in to make some small repairs to defending our interests throughout the sale process. Between their marketing strategy, spot on pricing, completely reliable, pleasant and efficient support tem, and Anthony and John’s persistence, the process was enjoyable and financially rewarding as anyone could hope. And given that I was living in California the whole time, I have to give the team very high marks for their work! After this whole process I have an even greater appreciation for your straight forward, “my job is not to tell you what you want to hear, my job is to tell you what your house will actually sell for,” approach to home selling. “Bottom line, what I most wanted to hear from my agents was a price that what would ACTUALLY get me a sold sign in front of my house and to the close of escrow.
-Jessica C., Holbrook, Massachusetts