In this video, Ron Henderson President/Broker of Multi Real Estate Services Los Angeles, CA debunks old myths, and gives a contemporary approach to pricing real estate to realize the highest monetary return in the shortest time on the market.
How you price a property for sale can be critical. It’ll determine how long a property stays on the market, and how much money will be realized once the property is sold. I’m not going to get into staging, structural upgrades, or marketing, just what you should consider before solidifying a listing price.
1) No arbitrary numbers. You can’t pull a list price out of the air. Just because you want to net a certain amount, or you owe a certain amount of loans against a property, has nothing to do with how you should price a property, or what it will sell at.
2) There are 2 values you need to consider. Market value and Appraisal value. Market Value is what a ready, willing and capable buyer will purchase a property at.
Appraisal Value is what an appraiser will base a value on using closed sales. It’s no big deal if you’re dealing with an all cash buyer, but if a buyer has to get a loan, it will become a consideration. Unless you’re in a super hotmarket where there’s no inventory and buyers are willing to come in with extra cash to make up the difference in the loan to value, you may have an issue closing the transaction.
3) Comps. Look at the recent sales information on properties like yours, and be smart about it. It is easier if you have a tract home in an urban area, rather than a custom home in a non-conforming region. Always look at the last 90 daysof sales within a ½ mile radius, pending and closed sales, notactive listings. The only thing the active listings are good for is to show you how much competition you have, and what prices are sitting on the market. Expand the distance and the timeframe of your search, only if you can’t find accurate comps. Don’t cherry pick, look at the market as a whole. Get your ego out of the equation. Look at the comps as if you’re a buyer.
4) What kind of market are you in? Is it heating up? Is it slowing down? The majority of the time, the information you get fromthe media and indexes are obsolete by a month or two. What you want to do is look at the current inventory levels, quantity of pending and closed sales, the trend of interest rates and the strength of the overall local economy. Also are loan underwriting guidelines loosening, or tightening. Remember basic economics 101. Supply and demand. If the market is slowing down, you don’t want to have a list price that is too high, where you’re going to be chasing the market down with price reductions.
5) MLS search price breaks are critical now, since technology has become such an integral part of a property search. Buyers and agents generally put in the century or quarterly numbers in their database search parameters. Think $475K, $500k, or $525K… not $476K, $505K. By pricing just over the break points, you’ll be eliminating some showings.
6) Eye Balls. Even if you think you’re being smart by pricing slightly high to allow for negotiations, be careful. You want to have as many qualified buyers in your price range see your property as possible.
7) You’re only Fresh Meat once. When you first come onto the market, all the pent up buyers for your type of property will be watching for you. The majority of the interest in your property will wane after the first couple weeks you’ve been on the market. Feeling out the market with an overly high list price will not be constructive in getting the highest sales price. You may have to take price reductions in the future to stimulate activity, but you won’t get the same activity than if you priced the property properly to begin with.
8) Multiple Offers would be highly constructive in getting a higher sales price. People are funny. Their psyche is different when they think they like a property, but when they find out somebody else like the same property, it confirms their judgment, and they are willing to bemore aggressive with their purchase offer.
You want to logically price the property to get the highest amount of qualified showings of the property possible, given the market. On the flip side, if you are on the market for a couple weeks, and no offers, be sure to get feedback from the agents and buyers that have seen the property, and see if there are specific issues you can resolve.
9) Timing in life is everything, but the old idea that properties won’t sell in during the winter holidays, and it’s better to wait till spring is wrong. Especially now with technology,buyers can be alertedimmediately when a property comes on the market, the motivated buyers are always out buying.I’ve sold properties right around Christmas several times. Why wait till spring when there’s more competition on the market?
If you’re in the Los Angeles region, and have any specific questions, always feel free in contacting me through my website mres.com or the email address or phone number shown below.