Real Estate: Name Your Price
by
Mike Walker(As published in March 22, 2001 in Metro Weekly Magazine.)
If and when you decide to sell your home, you're going to have to do two things. The first, discussed in this week's column, is to figure out how much to charge people for it. Second, once you've decided what you think it's worth, you'll need to prepare the property so that it represents its optimum condition to the prospective buyers. Preparing to Sell Your Home will be the topic of next week's column.
Pricing a property for sale is a joint decision you and your realtor can make together. But keep in mind - always - that the real estate professional probably knows more about this than you do. She or he deals with the market conditions on a daily basis and is in a far better position to know the value of your home.
Your agent will probably begin by doing a market analysis of your property for you. This is an examination of other properties in your neighborhood - typically over the last 90 days - that are comparable to your home. Such an analysis will seem to contain cryptic and mystical facts and figures - easily explained by a well-seasoned agent.
"This is the time to listen to your agent without being either defensive or, on the other hand, overzealous." This from Ed Downs of Weichert Realtors, who continues: "A good agent will give the owner a reality check. Maybe there are deficiencies that can be corrected. Maybe there are some deficiencies that cannot be changed. The prevailing local standards and current market trends will tell your agent which shortcomings can and should be addressed, and what other issues should merely
be factored into the asking price."Your home may have some features that you think enhance its value, but in reality might not. "One home had a waterfall installed in the kitchen breakfast area," remembers Downs "The sellers thought it was a real hot feature, but open house visitors kept speculating how much it would cost to have 'that darn shower removed from the kitchen.'" On the other hand, your home may have features that really do enhance its appeal and price. An obvious example of this would be a home with an unobstructed view of monuments. The good agent will know how to evaluate each feature, pro or con, and help the seller view them objectively.
The market analysis will also look at things like the total number of rooms your property has, square footage, and general condition of the home. Armed with this analysis, you'll both be better equipped to determine a fair market price. At this point your agent may be able to suggest a price range for your listing.
In the event that you have a certain price you feel your home is worth, the agent may suggest pricing your home even higher than market value. Julianne Waesche, an agent with Tutt, Taylor, and Rankin Real Estate, says this is one strategy that occasionally works. "But," she says, "It's obvious that by doing this you run the risk of your property, even in today's hot market, languishing on the market." At that
point, she continues, "a savvy buyer can come along who knows that your property has been on the market for a long time and the seller may entertain a lower offer."Keep in mind, however, that overpricing your property may increase the probability that fewer people will look at it. On the other hand, it's not uncommon for other realtors to show off your over-priced home as a way of making other, suitably-priced homes more marketable.
Julianne suggests that doing the reverse - pricing your property a little below its market value - could encourage multiple offers and actually drive the price way above that asking price. "Of course. things are a bit fickle these days and you run the risk of gambling and not winning. If only one contract comes in then the seller is stuck." Another downfall, she says, is that if a full price offer comes in and it meets all the terms of the listing agreement and the seller refuses to accept the offer then - legally - the agents are owed a commission. "Of course, being charitable people, we usually don't pursue this. A caveat that is useful is to put in the MLS a statement that exonerates the seller which reads: 'Seller reserves the right to accept offers above full price'.
The amount you decide to price your home can be critical. Ask too much money for it and you could scare off potential buyers; don't ask enough and you might just be selling yourself short. Folks who try to set their own price without consulting a real estate professional may merely copy what they're neighbors did when they were lucky enough to sell their own over-priced home. Or they could become so sentimental about their home that they find it difficult to gauge a realistic price. You want to set your property's price in a range that is both reasonable to you and appealing to potential buyers.
From a marketing perspective, an overpriced home may estrange potential buyers. Then, even if you decide to lower your price later, you will have missed catching potential buyers who will be long gone. Another thing to remember is that a property that sits for too long on the marketplace just looks bad. If a buyer who was first turned off by your price happens to see your home on the market a month or two later, they might begin to wonder if there's something wrong with the place.
In addition to the market analysis, your agent will examine a variety of other issues and traits to help you determine your initial asking price. These will include:
General Market conditions: This generally refers to the strength of the marketplace. Washington, DC is presently in a seller's market so prices are generally high. In the event that things switch and people stop looking for homes to buy, we would enter a buyer's market. And home prices might stop escalating and possibly, stabilize.
Comment from prospective buyers: People visiting your home during an open house can give your agent a good indication of whether you've priced your property sensibly.
Condition of your home: It might not seem obvious to everyone, but a home in good condition will sell better than a comparable home that needs work. Retiling a bathroom or upgrading the electricity can achieve making your home look more attractive to prospective buyers. Keep the improvements fairly basic, however; putting heated towel racks in the bathroom may not be as important to a potential buyer as they are to your and your beau.
Also keep in mind that:
Location of your home: Simply stated, identical homes in Dupont Circle and a neighborhood in transition may have different market values.
Economic conditions: There is no denying that the state of the economy can affect the real estate marketplace. It's important to remember, however, that the state of the economy is determined over a period of time and not by fluctuating day-by-day media reports.
Supply and demand: Most realtors agree that if a buyer wants your home, they're going to make an offer on it no matter how high you price it. You just have to find the right buyer. Depending upon the market, that could take anywhere from a few days to a few years.
Tax Assessments: Every few years, localities evaluate their valuation of homes for real estate tax purposes. The assumption that there is a link between a tax assessment and what the market will pay is generally very dangerous, however, there are times, under certain market conditions, and in certain market sub-segments, where there may be a coincidental link between the two.
When everything is said and done, many variables make pricing your home a complicated process. Ed Downs says, "If the seller keeps in mind that pricing is as much an art as a sci-
ence, they will both welcome and understand the agent's critical input."- 30 -
