Report #4 – Establishing the proper listing price for your home

People often ask me when the most critical time period is, in the marketing of their home.  Many assume quite logically, that it’s the first week in which it is exposed to the open market.  While that time is critical, of course, there is one time period which is even more important, and that is the two weeks BEFORE it hits the market.  It’s during that time, that we are working together as a team to accomplish two important goals.  First, as mentioned in one of the earlier reports is the preparation of the house itself.  Next, comes the issue for this report, which is establishing the proper listing price for your property.

As I look at the many successful sales I’ve worked on in the last year, the one common theme has been that they were priced right to begin with.  None of them were “underpriced,” but they were properly prepared, and priced competitively, and every one of the Sellers got top dollar in the end.

Often times, I am told the same line by home sellers, “I don’t want to give my home away!”  Well, that makes sense, neither do I.  So far I haven’t yet figured out a way to make more money by selling my clients homes for less!  In the end, we all have the same objective, which is trying to get the best price possible in todays market.

The first goal in doing so, is to analyze just how much a property is actually “worth.”  That’s not as easy as it may seem, however, because ever home is different, and the more unique a property is, the harder it will be to find comparables.  Even if there are comparables, are they “identical?”  Two homes are the same size and on the same street.  One has been updated more than the other, yet the updated one sits on the corner of the adjacent road.  How does one adjust for that?  Will it matter to some buyers, or to all?  Most importantly, which factors will have the largest influence on the ultimate price.

This is where the trained eye of a Realtor like myself can often come into play.  Since I am out in the trenches with Buyers each and every day, hearing what they say about different properties, I can read between the lines, and look beyond the sheer numeric aspects of it all.

I did want to talk about one more thing, before we get into strategy, and that is the difference between value, and marketability.   For some, perhaps most, it would seem as though those two terms are the same, in that they both have to do with price, yet there are subtle differences worth noting. In the world of cars, it’s sometimes easier to understand.   When you go to buy a Ferrari from the factory, you can actually order it in any color you want.  There’s no extra charge, and therefore the red Ferrari, and the lime green one, have, by definition, the same “value.”   Now, fast forward a few months down the road, and imagine that you’re trying to sell the car.  Who in the world would want to buy a green Ferrari?   You might have to sell it for 50K less, not because the “value” is any different, but just because it has lower marketability.

If I haven’t lost you by now, the point I’m trying to make is that once you have accurately defined the value, you need to loo further at the marketability factors that may influence the ultimate sales price. For example, two identical homes in an identical neighborhood are defined as having the same value, but the one on the cul-de-sac has greater marketability, as does the one with the larger and more private backyard.  There is no tangible formula for defining this, so don’t wrack your brain trying to equate number of feet of yard space to X dollars of sales price, but rather it’s just a general feeling that will only be apparent once Buyers walk through your home.

When evaluating a potential listing price, the first place we all start, of course, is looking at the similar properties which have sold in the last six months.  This is totally relevant and proper to do, however it fails to take into account the simple fact that while those homes may have sold for a particular price months ago, they are no longer for sale today – as well as the fact that the market fluctuates constantly, based on supply and demand. When looking at comparables, therefore, it’s important to also look at the competing listings in the marketplace.  After all, these are the properties that will ultimately determine whether yours commands top dollar.  If properties are for sale in the market that are better than yours, for less money, then you are totally out of luck.  As you review the current listings, and again this is in the weeks before yours is ready to go on the market, you need to be objective, which is obviously hard for anyone, since we all think our property is the best.  The question to pose, however, is what do other people thing? Yes, your home on the exit ramp of Route 290 is, “close to major routes,” and I’m sure that’s been handy in the past, but would most people think that it’s better than living adjacent to Dean Park?  Probably not.

Still in that mode of analyzing the current listings, you’ll want to break free from the bonds of having to look only in the town you live in, and consider the fact that customers are often looking in multiple communities, and that you need to consider the properties for sale in those towns as well. It may seem odd for a homeowner in Westboro to look at comparables in Shrewsbury, Northboro or Grafton, yet in the end, many consumers that are out house hunting are looking in those towns as well.

The striation factor is another aspect to always take into account in any pricing structure.  This comes in the form of striations, or layers, in price points which must be considered as relevant to any pricing structure. The premise behind it is that you want your home to always be the best one that a particular client saw all day long.  The way you do that is to evaluate what ranges particular Buyers will be looking in, and always be at the top of that range.  Logically, for example you would never want to list your home at $501,000, but rather at $499,900.  In the latter case, your home will be viewed by people looking between 450-500K.  To them, it will be the best home they see.  At $501K, you’ll be seen by Buyers looking between 500-550K, and it’s highly unlikely you’ll ever win that battle.

The last factor, or at least the last one I’ll talk about for the moment, is the pool of available Buyers out there, looking in a particular community and price point.  Each town has it’s own unique micro-economic world, which varies from time to time, and in which there may be either a surplus or dearth of inventory.  It’s important to research this and play off it to ensure that you get the best possible price that you can. In Shrewsbury recently, there was 9and still is) a huge backlog of Buyers in the mid-$500’s.   This means that if you have a home that you know may be worth $519k, based on all the different factors mentioned up above, you might be able to get substantially more for it, based neither on value, nor marketability, but rather based solely on supply and demand.  I had such a property recently, which I was perfectly ready to put on at $525K.   After an analysis of the Buyer pool, however, I opted to start it at a much higher price than might have been otherwise warranted, and I think our highest bid the day we hit the market was close to $590K!!   In such cases of undersupply or over demand, you need to be able to do all of your exhaustive analyses, but then throw it out the window and start from scratch.

One this has always been true, however, and that is that your FIRST shot, is always your best.  Because of this, you’re far better to be underpriced, and have multiple over full price offers, rather than being overpriced, missing that initial pop on the market, and starting from scratch down the road, with one price reduction after another.  I often discuss this topic with my home sellers, who again are understandably worries about whether or not they will get the best price.  I tell them, somewhat tongue in cheek, that in the end, they could put the home on the market for a dollar, and at the end of the week, they would know exactly how much it was worth.  They’d have 1000 offers, and when they laid them out of the floor in order of lowest to highest, and picked out the highest one, that’s “the value.” After all, you might note, that’s how most other things are sold, right?  I mean Sotheby’s doesn’t start the auction on Marilyn Monroe’s dress at $100K.  If they did, nobody would show up to bid on it.  Instead they start at zero and see who will get passionate about bidding, and almost always drive the price well beyond the original estimate.

In any event, this is a report that I will probably continue to add to over time, so feel free to check back.

If you have a great idea for topic #5, by all means send me an email and I’ll consider it.  You can always reach me at steve@shrewsbury.net

 

About Steve Levine

For nearly three decades, Steve Levine of REMAX Professional Associates, has been one of the top Real Estate agents in the Central Massachusetts. A ten-time honoree as #1 REMAX Agent in New England, he brings to the table the experience that comes from working successfully with over 2000 Buyers and Sellers, through all types of real estate markets. Adept at everything from land development, to custom home building, to residential single family and condo sales, his “can do” approach has made him one of the most sought after agents in the region.

A consummate marketing aficionado, and recognized as one of the most innovative Realtors in the industry, he has spoken nationally on many occasions, training other real estate agents on customer service, marketing, and web presence, and is currently developing a suite of instructional videos designed to enable agents to take their business to the next level.

When not out selling Massachusetts’s real estate, Steve is a passionate photographer, musician and writer, and is constantly looking for new ways to express himself.

For a private consultation on your Massachusetts real estate needs, he can be reached by email at steve@shrewsbury.net, by phone at 508 735-4663.

You can also check out his photography website at www.stellarimages.us .