Setting a Reasonable Selling Price
WHO DETERMINES THE SELLING PRICE OF A PROPERTY?
The Buyer! By “comparison shopping,” buyers determine the relative values of similar properties, and then make their offer. A property will never bring a higher price than the one that an informed, ready, willing and able buyer will pay.
HOW DO COMPARABLES OF PAST SALES AFFECT THE PRICE?
Past sale comparables, as recorded by the Multiple Listing Service, are used by real estate professionals to help sellers set a price. This is based on what buyers in the last six months have been willing to pay for properties that are much like, though not identical, to the sellers’ property. These comparables are also used by appraisers to determine the appraised value upon which the lender bases the amount which they will lend on the property. A rapidly changing, up or down, market will affect these values.
HOW DO PRICES OF ACTIVE LISTINGS ON THE MARKET AFFECT THE SELLING PRICE OF A PROPERTY?
These are the properties that a buyer (and their Buyer Broker) will “comparison shop.” They will compare size, location, quality, condition, amenities and price of properties in a range of prices, and make a judgment about which fits their needs and “pocketbook” best. By the time most buyers make an offer, they are well educated about the market and make an informed decision as to the values of specific properties.
HOW DO WITHDRAWN AND EXPIRED LISTINGS AFFECT HOW WE CAN DETERMINE A GOOD LISTING PRICE?
Withdrawn and expired listings usually represent sellers who have become disillusioned with having their property on the market or have had a change in circumstances. They may have decided to rent it for a period, or to keep it off the market for awhile so that prices might catch up to their selling price. Many times these are overpriced properties that were unsuccessful in the market place.
HOW DOES THE CONDITION OF MY PROPERTY AFFECT ITS VALUE?
Buyers may be comparing your property to new construction or to immaculate and completely updated older homes, with new bathrooms and kitchens, new carpet and window coverings. Many people do not want to be compelled to redecorate before moving in or, even worse, while they are living in the home. It may be a matter of cash, time, or abilities, but in the real world, most people want to move into a clean, up-to- date, inviting home. The only way that some buyers will consider a “fixer-upper” is for a substantial discount, a discount that will be considerably more than actually would be needed for the job. So, if sellers want to get “top dollar,” their property must be in “top condition.”
HOW CAN WE DETERMINE THE TRUE VALUE OF A PROPERTY WHEN PLACING ON THE MARKET?
Using comparable past sales, withdrawn and expired listings, and properties currently for sale, your REALTOR can help you determine an offering price and introduce it to the market. A testing of the market occurs within the first two to three weeks, when enthusiasm is at its highest, with the beginning of marketing to the Realtor community and to the public. A pent-up market of buyers will either accept or reject the property and its price.
WHAT IF WE HAVE LOTS OF SHOWINGS OVER A PERIOD OF A FEW WEEKS, BUT NO OFFER?
If there is a lot of interest, and there are many showings, but no offer, we can determine that the market has rejected the price and the sellers can then reconsider their offering price. Or the price can remain the same, the market testing can continue, and sellers can wait for new buyers to come on the market.
WHAT IF WE HAVE FEW, OR NO, SHOWINGS IN THE FIRST COUPLE OF WEEKS?
If there are few, or no, showings, there may be no buyers in the price range in the market at the time (this is especially true in the higher price ranges). There may be many offerings in the price range and this one doesn’t stand out as particular good buy. Or, Buyer Brokers may be rejecting the price out-of-hand because of their knowledge of how the price relates to past sales and competition in active listings in the price range. They are counseling their buyers on the market place and will not knowingly waste their clients’ time inspecting what they perceive as overpriced properties.
WHAT IF I “NEED” A CERTAIN AMOUNT OF MONEY TO NET OUT OF THE SALE?
The amount that a seller needs has no relationship to what a buyer will pay for the property.
HOW DOES THE TIME VALUE OF MONEY RELATE TO PRICING MY PROPERTY?
“Time is money.” This is most evident when an overpriced property has languished on the market for months, and maybe years. Many a seller has regretted not accepting a lower offer at the beginning of the marketing period and/or not reducing the price earlier to the price that was eventually accepted. The quicker a property sells, the higher the selling price. The more time goes by and the more buyers that reject the property at its listed price, the more “shop-worn” it will be perceived and the lower the price will have to be to attract the final buyer. Buyers realize that the property has been rejected by many other buyers who looked and didn’t buy. Buyers also perceive that sellers of a property that has been on the market for a length of time are going to be desperate for a sale and that they will accept a “low ball” offer.
WHAT IF I’M NOT IN A HURRY TO SELL, BUT WANT TO “FISH” FOR A BUYER AT AN INFLATED PRICE?
Sellers that are not serious and realistic about selling their listed property risk the “shop- worn” syndrome noted above and an eroding of value of their property as time on the market increases.
AREN’T THERE “RICH” BUYERS OUT THERE, THAT WILL JUST LOVE MY PROPERTY SO MUCH THAT THEY WILL BE HAPPY TO GIVE ME MY PRICE NO MATTER HOW FAR OFF THE MARKET VALUE IT IS?
No.
WHAT’S THE BOTTOM LINE?
When realistic pricing is combined with effective marketing by a professional and experienced REALTOR, like the Paul Kaplan Group, there is a buyer for every property. Any property can be sold in any market.