When you list your home for sale it’s important to understand what it will take to get it sold and how that process works. For every piece of property there is a price where it will sell and sell quickly, but how do you determine what that price is? What causes people to buy? The factors that control the buying process in residential real estate transactions are Price, Quality, and Selection or Scarcity. The “MAGIC PRICE” is derived by taking each of these into consideration and weighing the factors appropriately. Pricing your property correctly to reflect the current state of the market is the most important thing you can do to make it sell. You also need to consider quality or perceived quality in your pricing strategy. If your home is in need of repair or doesn’t make a good impression, you need to allow for that. Also if your home is one of many similar homes on the market you need to adjust the price to stand out if you want to move it quickly.
How do you start? Contact a broker you have a relationship with or find one who is familiar with the market that your home will be competing in. Ask for a CMA (comparative market analysis) which will tell you what similar homes have sold for and what comparable properties are currently priced at in your market. Also, use the current town tax assessment. This will be a starting point. How is your home different? QUALITY! Take all factors into account such as condition of the home, landscaping, amenities, schools, tax rate, location, and neighborhood. Add for positives and subtract for negatives. How many homes are for sale in your price range and market area? SELECTION or SCARCITY! If there are many homes similar to yours for sale, you will have to make adjustments to make your property stand out. Conversely, if there are few competitors you can adjust for that. The final thing to factor in is our old friend – the state of the current local real estate market as it pertains to your specific situation. There are markets within the market – waterfronts, condos, residential with water access, and residential. Know where you fit and who your competitors are.
There are two basic ways to list your home for sale. One school of thought is to start at high price and negotiate from there. There are agents who will take a listing at any price to sew it up for period of time, and then will constantly be after price reductions to get the listing to where it will finally sell. Every day I get notices of price reductions on overpriced listings. I believe there are two things wrong with this approach. First overpricing leads to the listing becoming stagnant. It sits and does not attract any attention and usually develops a “something’s wrong” stigma. This, I believe, leads to a lower final sales price. People feel they’re buying damaged goods. Second, the most attention any product gets is when it is initially introduced to the market. If the first impression is a negative one, that’s very hard to overcome. Don’t get me wrong, this approach will work if you reduce the price often enough and you don’t care how long it takes to sell you home but it takes a long time and almost always results in getting a lower price than if you priced it correctly up front.
The second way to list your home is to use the “Magic Price.” Price it correctly and when it is listed it will generate immediate interest and will usually sell for the best price the market can provide.
If you have any questions, contact me firstname.lastname@example.org and I’ll be glad to talk with you.
Kim Cedarstrom is a licensed residential and commercial Realtor© and consultant and president of Great Northern Real Estate and Business Consultants, an affiliate of Roche Realty Group offering a lakefront/residential real estate practice as well as commercial property and business sales services. Kim can be reached at email@example.com or directly at 603-520-6609