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Re: Home-Pricing Tips for Any Market
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 If the price isn't right, buyers won't bite. That about sums up the current state of the real-estate market in most areas of the U.S.
Yet just last week, in my job as a director of marketing for a real-estate brokerage in southeastern Pennsylvania, I encountered yet another seller who wanted to list his home for a far higher price than he likely could achieve in the present real-estate market.
So how do you know what price to put on your house? Realtors hear all sorts of pricing strategies from homeowners, ranging from the fairly common, "The neighbor’s house sold for ___________ last year, so I think my house should be priced at least at ___________," to "I have ___________ invested in this property, so I can't sell it for less than ___________."
Neither one of those approaches is the best way to figure out "The Number." Home values in most U.S. markets are down or at best, stagnant, from a year ago. And if you bought a home and created your own version of Versailles in a neighborhood full of modest maisonettes, then you might never recoup the full value of your improvements even if you can wait out a sour housing market. (For one of the best summaries of remodeling trends and return on investment, see this report from Harvard University’s Joint Center for Housing Studies.)
Hitting the Sweet Spot
In reality, it's not homeowners or even real-estate agents who determine "The Number," how much a home ultimately will sell for; it is home buyers – the open market – who really set the price. Here’s how the process of setting a price routinely goes.
Good real-estate agents will do their best to present a well-researched comparative market analysis (CMA) to a client. The goal should be to quantify and rationalize a price, to remove the emotion that so often misleads a seller into overpricing the asset. The CMA should clearly explain:
- what comparable houses have sold for, preferably looking at VERY recent sales within the past six months, including the percentage difference between listing price vs. sold price and how long comparable homes were on the market
- what comparable properties presently on the market are listed for and how long they have been on the market
- the characteristics of comparable properties sold and presently listed, including acreage, square footage, architectural style of the houses (important because in one market, contemporary-style homes may command a premium while in another market it may be historic homes) and other features, such as how new the kitchen and bathrooms are, the floor plan, whether the basement is finished, how new the roof is, what school district the home is located in, whether the property is on a busy road, etc. (As an aside, the value of a swimming pool generally is determined by the local market. In the Northeast, pools typically don’t add or subtract value unless they are in poor condition. In warm-weather climates, they can be a positive.)
Your real-estate agent should also look carefully at your property and ask many questions about its amenities, construction, mechanicals and maintenance. The agent might also have fellow agents look at your property and offer a price opinion.
'The Number'
When this research is complete, your agent will present a listing price, perhaps a range. Again, the goal is to determine a price based on rational, quantitative information.
In the case of the house I visited last week, the agent suggested a listing price of $1,200,000. Upon stating that number, the client's face became flushed and he put his head in his hands. Uh-oh. And then we heard the all-too-familiar line: "But I need to list this for at least $1,800,000. You couldn't build this home again for less than $2,200,000."
Clearly, we were miles apart. We don't know how urgently the owner needs to unload the house as he was rather secretive about his reason for wanting to sell. He then had a new appraisal done on the home. It stated a value of $1,200,000. He had a four-year-old appraisal that presented a value of $1,500,000. Sadly, even a one-year-old appraisal is too old in the market we’re in.
The seller said he would agree to list his home at $1,600,000 but that he would be quite firm on the price. That means a low-ball offer – one that approaches what we think is the pricing sweet spot of $1.2 million – won't fly, unless there is more urgency behind the situation than we realize.
What price is right? It may be that the appraiser is being conservative, and we don't ever want to shortchange a home seller who may have been able to get more money for a property. It may be that there is the perfect buyer zipping around the area who will see the house and fall in love, though of late those scenarios are about as common as a winning lottery ticket.
The Next Step
The agent has decided to list the house at $1,600,000 because he does not want to lose the client to a competing real-estate firm. We will professionally photograph it; inventory its features; invite agents to preview it and provide feedback; and expose it to local, regional and national audiences. If we do all of these things and do not have any showings within two weeks given that we are in the spring market, then we likely have a home the market is telling us is overpriced. We will listen carefully for feedback from agents and any buyers we can show the house to. In reality, this may be the start of a long-term relationship that isn’t satisfying to either party.
Stay tuned for updates on how this listing is proceeding. I'll let you know whether the house is seeing a lot of activity, undergoes a price reduction or, I hope, goes under agreement and sells.
In the meantime, what would you do if this were your house?
-- Valerie Patterson oversees all online and print marketing efforts at Kurfiss Sotheby's International Realty, a privately-owned real-estate firm based in the Philadelphia area. Prior to joining Kurfiss, she was the producer of The Wall Street Journal's free real-estate site, RealEstateJournal.com.
Message Edited by Val_A_Patterson on 04-20-2009 10:21 AM
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