A competitive real estate market can seem like such a gift to those looking to sell their homes and investment properties. It is, however, not always the case that sellers win the ‘real estate lottery’ when unloading their homes. There are many ways a sellers market can work against you. Here are our tips for pricing your home in a sellers market:
The RIGHT Price is Everything!
This is the most important factor in our current market. In previous years, the typical listing appointment with a seller would go a little something like this: seller and agent meet to discuss marketing and price. Agent gives seller a range of what ‘fair market value’ would be for said property. Seller inflates that number anywhere from 5%-15% to ‘leave room for negotiation’. Now, here are the facts that we know to be true about both buyers and sellers. Sellers want the most money possible for their property, and buyers want the best possible deal for a property. In today’s market, buyers just want to get into SOMETHING reasonable within their budget. If a home fits their budget and criteria, they will offer. However, they are not typically gullible. Most buyers are working with agents, and have a good idea of price points for the types of homes they are looking for. If the home is priced too high, the likelihood is that it will sell for less than it would have if you priced it just right, or slightly under fair market value. Something changes in the buyer psyche when buyers are in competition. They will bid a property higher than it would normally go, were it priced over fair market value. We will go through an example below, but I will provide a scenario here as well. If a home is priced at $400,000, and fair market value is $385,000, it will likely sell around the $385,000 mark. If the same home is priced at $350,000, it would likely go into multiple offers and sell close to or over $400,000. We have seen countless examples of this in the past year.
Here is a recent example of what’s happening in the current marketplace with one of our own buyers. We won’t reveal the buyers names, or the addresses of the property, but below is a great example of how pricing can impact your bottom line:
When the property didn’t go into multiple offers on offer presentation day, our buyers submitted an offer just below asking with financing and inspection conditions. The seller countered to us once, and then decided he thought he could do better, and let the offer die. He received an offer the next week, also with conditions of financing and inspection, and the property sold for $320,000.
In my opinion, property B is a better property overall. It’s in better, more ‘move in ready’ condition and has a garage. Even if we say property B is the same as property A, the frenzy caused by the underpricing of property A caused it to be bit up that much higher. Buyers may bid a property higher than the agents, and even the sellers believe it’s worth, yet if the property is priced higher than fair market value, buyers aren’t willing to match what the seller is asking – especially when the buyer isn’t in competition.
Keep The Emotion Out Of It!
As difficult as this may be, you have to do your best to look at selling your home in the most pragmatic way possible. After all, your goal is to net the most amount of money for your house. The best way to do this is to check your ego at the door and look at the facts. Once you do that, you can set realistic goals for what to expect from the transaction. Just because it’s a seller’s market, doesn’t mean that you should be unrealistic about the price you want. I had someone approach me the other day, suggesting that he list his house for $700,000, just to see if he would get it. With fair market value for this home being somewhere in the $550,000-$575,000 range, it would be a waste of everyone’s time to list the house.
Hire a Professional, or be REALLY Sure You Know What You’re Doing
There is obviously some bias here, but it’s especially in a fickle market, you want to make sure you have a professional on your side to maximize the amount that you will get for your house, as well as to protect you legally and keep you out of the courtroom.