Andrew Wetzel's Musings

March 20, 2019

How do I Price My House?

Filed under: Ethics,Hiring an agent,Price,Selling — awetzel @ 4:37 PM

Pricing is more art than science and its importance cannot be overstated.  Every house has a price at which it will sell and different buyers will see a different value when they think about your house.  The asking price is one of four tools used to market any product including Real Estate and it is the only one that a seller controls. The others are location, the features and condition of the house and how the house is marketed or exposed to the public.  Most sellers will not or cannot make substantial changes to their house and the Internet has changed how we market Real Estate.  Here are three different pricing perspectives for sellers to consider.

  1. What is the market telling you? An agent can do a CMA (comparative or competitive market analysis) to tell you what is going on within your local market. Who is your “competition”?  When you pick your asking price you pick your competition meaning the houses buyers will consider along with yours.  A house should be priced to compete based on location, features and condition or prospective buyers may be able to find similar houses for less money or get more for your same price.  When interest rates are low, buyers will “qualify” for larger loans and may be willing to spend more to get more rather than making upgrades later.  Buyers may not offer you the opportunity to negotiate your price.  Know your competition in terms of what they have to offer and at what price.  What is “under contract” and what has been selling?  A good agent will keep you informed!
  1. Sellers pick the price but buyers determine the value! As I mentioned before, when you price your house you determine your competition so price strategically and stay on top of the evolving market! Buyers and appraisers can be very objective.  A good agent will help their client stay focused and balanced.  After putting their house on the market, too many sellers forget about their competition while they wonder why they are not getting showings or offers.  You cannot assume that you will get a chance to negotiate the price, especially if your local market has houses offering more in the way of nicer or newer features in better condition at your price or offering what you have at a lower price.  Buyers will take their time to compare and evaluate.  Buying Real Estate is an emotional decision justified with logic.  A seller who is getting no showings or showings but no offers may have a pricing problem.  If you decide or are told to lower your price, think about what you are doing or you may be throwing money away for no reason.  Will your new price motivate buyers who know about or have seen your house?  Will it “re-position” your house strategically so that a new group of buyers will know your house is available?  Again, the importance of pricing cannot be overstated.  Most buyers “shop” online for Real Estate.  If they find houses they like in their search results priced lower than yours, they may never adjust their criteria to find your house.  That being said, perhaps what you have is really a marketing problem.  If you do, buyers who could or should be interested in your house may not even be aware that it is on the market because they are not seeing it in their search results.  If that is the case, a price reduction may not be necessary and lowering your price will not solve the real underlying marketing problem.
  1. Will your house appraise? The two biggest hurdles in selling Real Estate are the inspections and the loan approval which includes a property appraisal. “Buyer remorse” after an inspection can be overcome through negotiation meaning that a seller agrees to do some repairs or they offer the buyer a credit or both parties agree to adjust the selling price.  Qualifying for a loan requires that a buyer understand what will happen and when. Hopefully a solid pre-qualification will lead to a full approval.  However, a low appraised value, meaning that the sales price is not justifiable based on the local market, is hard to overcome.  Unless an error is found in the paperwork, either the seller has to agree to lower the selling price or the buyer has to bring more of their own money into the sale.  Sellers may be limited by what they owe or what they need to make a move.  Many buyers will not agree to using more of their own money if the property does not appraise for what they offered. Potential appraisal problems can be avoided by setting a realistic asking price.  The purpose of the appraisal is to protect the lender’s financial investment by making sure that the loan makes sense based on recent sales of similar properties.  It is hard to deny that that makes sense given past mortgage losses!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

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