Pricing your home to sell

You have probably already heard what similar houses in your Neighbourhood have sold for. But hearsay isn’t enough. You need to weigh all the determining factors of the real estate market. To arrive at a fair price, you need an expert evaluation of all market conditions; in other words, you need a professional market analysis. One tool that you may employ to determine your asking price is the "Comparative Market Analysis" or CMA. This method of appraisal is based on the premise that the price paid for a commodity will be equal to the cost of acquiring a substitute under the same market conditions. For example, the appraiser estimates the market value of a subject property (the property being appraised) using evidence of sale prices of similar properties (comparables) which have sold recently. The main difficulty inherent to this method of determining market value is finding recent sales of similar properties and then demonstrating that those properties are comparable to the subject property. All things being equal, the typical CMA will consist of comparable properties within a given area which are currently listed, sold or have expired; in addition, comparables may be properties that are similar in square footage, area of lot, year built, and/or layout. In all, a CMA is a very useful tool for determining the market value of most residential properties.

Also, many sellers do not understand that value comes from outside the house. The bricks and mortar are not what makes value; rather, value is in the eye of the buyer. In most cases actual cost of the house is not the key to value. Today’s key to value also goes beyond the old real estate maxim: Location, location, location. As such, other factors to include when determining market value include:

1. Economic conditions which reflect both national and community business conditions.
2. National, provincial, and local political activity that produces changes in tax laws, labor laws, sales regulations, zoning restrictions, reassessment of property, etc., etc.
3. Pressures of supply and demand, which create either a "buyer’s market" when there are more sellers than buyers and house prices may drop, or a "sellers market" when there are more buyers than sellers, causing house prices to go up.
4. Seasonal influences create a "buying season" and "off-season", although this traditional trend has given way to a more steady year round selling.

Dangers of Overpricing

Here are some problems caused by overpricing your house:

• Potential buyers will not even look at your house, thinking it is out if their range.
• Those buyers who do look are shopping by comparison, and looking at your home may convince then to make a offer on a different property.
• Since an appraisal is often required in financing a property, it is futile to price a property for more than it is worth.
• Properties left on the market for extended periods of time usually become "shopworn", causing many to believe something is amiss.
• Overpricing tends to dampen the other selling agent’s attitude, making it less likely to be shown.
• Overpricing lengthens marketing time, and invariably results in a lower selling price than would have been otherwise obtained.

Reasons for Overpricing

Most of the time homes do not sell when overpriced. The reason or justification for overpricing seldom changes this fact. Try to avoid the following reasons for overpricing your property; they seldom change buyer’s opinions:

Over improvement:
Improvements should be made for enjoyment, not just for resale. You cannot add an item to a home, select it to your style, use it, then expect a buyer to pay the original cost.

Need:
An owner’s need for money does not increase the value of the home.

Buying in a higher priced area:
Values are location specific. High values in the destination do not increase the value of the existing home.

Original purchase price high:
Chances are you paid market value. It is not a price that was too high, but a market that has experienced subsequent change.

Lack of factual data:
Base your opinion of value on recent documented sale prices.

Bargaining room:
Buyers may offer low, but they will do that at ANY price. It is easier to negotiate up to fair market value than to an inflated price.

Move is not necessary:
Even if the move is not urgent it is important to price correctly to preserve your marketing opportunities when the move becomes urgent.

Corporate buyout and foreclosure:
These third parties buy and sell thousands of homes each year at market value. Price your home very close to these prices.

Benefits of Proper Pricing

In contrast, you benefit from the following when you price your house at or close to market value:

Faster sale:
When your home sells faster, you save on carrying costs, mortgage payments and other ownership costs.

Less inconvenience:
If you have moved before, you know the energy it takes to prepare for showings, keep the home clean, make child care arrangements and alter your lifestyle. Proper pricing reduces this.

Exposure to more prospects:
At market value, you open your home up to more people who can afford the price.

Increased salesperson response:
When salespeople are excited about a home and its price, they make special efforts to contact all their potential buyers.

Better response from advertising and sign calls:
Ad calls and sign calls to Realtors turn into showings when the price is not a deterrent.

Attracts higher offers:
When a home is priced right, buyers are less likely to offer low out of fear of losing a good home.

Means MORE money to sellers:
If a home is priced right, the excitement of the market produces higher sales prices. You NET more both in terms of actual sale price and in less carrying costs.

Questions to Help you Analyze your Pricing

Honest answers to the following will guide you towards "strategic pricing," and help you reap the benefits of pricing at market value:

• Is the local market rising, falling or staying even?
• Is my opinion of value based on actual neighborhood sales prices?
• How many homes in this area are competing against mine right now? How does mine compare?
• Have any neighborhood homes been on the market too long? Why?
• Is my home consistent with, larger, or smaller than the surrounding area homes?
• Which improvements have I made since purchase that will actually increase value? Which improvements will not?
• Are my financial needs influencing my asking price?
• Am I willing to price right and stand firm?
• What is my gain by buying up in the present market?
• Are the benefits of moving important enough to price my home at the market?

Tips for Getting the Best Price

Our experience shows the following tips will help your house sell quickly and at the best possible price:

Select a price carefully:
Remember your price has to please three people: you, the buyer and the appraiser. The closer your price is to actual market value - what a knowledgeable seller will accept and a knowledgeable buyer will pay - the sooner it will sell.

Be sure your price is realistic:
Unrealistic prices are the major cause of "shopworn" listings, those that cause people to wonder if something is wrong with the house and result in eventual below-market sales. Over pricing actually helps sell other competing housed by making those listings look like better values compared to yours. If you plan to reduce the price anyway, why wait?

Show flexibility:
Consider evaluating the need for special financing, perhaps through owner financing.

Try to offer immediate possession:
Although move-up buyers may need more time, people relocating or first-time buyers may pay a premuim for quick possession (as they will save on rent).

Exposure sells houses:
Have a yard sign and provide easy access to property for showings. Lock boxes are a hassle free and safe way to accomplish this goal.

Offer extras:
For example, freestanding appliances, pool table, swimming pool chemicals, washer/dryer, full cord of seasoned firewood, etc. You may keep some extras out of the listing and save them as "sweeteners" for negotiations.

Fix up the house:
Keeping it in top condition inside and out will impress buyers and move your home to the top of their 'purchase' list. There is no substitute for increasing your selling price than competing offers to purchase.

HOME Kent Jorgenson  Re/Max Kelowna   100-1553 Harvey Ave  Kelowna BC V1Y6G3 1-866-229-2219