Many are familiar with the phrase, “location, location, location.” But given the current market, I’ve replaced those critical words with “price, price, price.” Looking good and smelling good as well as inviting curb appeal are all crucial elements to any sale. But pricing the home to sell is what often brings buyers through the door. And choosing the correct price is both an art and a science.
The seller wants the highest price, while the buyer wants the lowest. The only way the property will sell at the highest price possible is if the buyer agrees to the property’s value - and if a bank is involved, the price will need to be substantiated by a current appraisal to reflect what the buyer is willing to pay - or no sale.
Determining, Setting Price
We have three important tools to best determine market value: CMAs, appraisals and our market knowledge. Real estate may be global, but property values are still very local. And that’s why we’re such an important element in every transaction.
One of the most accurate ways to determine price is to include the market influences that impact price, such as the supply of homes versus demand, the condition of the local economy, and home appreciation rates. These three factors vary in every market.
An attractive initial listing price, based on fair market value, is important. You never get a second chance to make a good first impression. Remember that lesson that Mom taught us? Pricing greatly affects the number of attracted buyers. And properties almost always gain the most attention when their listings are new to the market. There are no “do-overs” in the game of real estate.
The mistake of overpricing or underpricing the property can have significantly opposite effects and disadvantages. While overpricing makes the seller more comfortable about negotiating down, it also makes the property less appealing to prospective buyers who may be the best match. Underpricing will draw many buyers, but the chances of regretting the sale will increase as the owner may lose a good deal of the investment equity that had built over the years. Follow these three steps with pricing:
- First, consider each seller’s personal situation. Do they wish to sell as quickly as possible? Do they have all the time in the world? To coordinate the right strategy and to meet the seller’s needs, clearly understanding the seller’s motivation is crucial. Learning the motivation(s) for both the buyer and seller is one of the most important things we do; no matter how good we are, if they lack motivation, the transaction will not close.
- Second, ask the seller to look at their home through the buyer’s eyes. The sentimental value they place on the property has no value to buyers; only what they see - as opposed to feel - will convince them to meet the asking price. Encourage the seller to put in the effort to improve the condition of the property so the accurate price can be set.
- Third, evaluate the competition. Similar homes for sale in the neighborhood are a great barometer. Compare the property and evaluate the way other properties are priced. The competition may be doing it right, or you may learn that they are overpricing their home … information to use to your advantage.
Marketing Challenges and Pricing
In real estate, it’s no secret that you must be priced right to attract potential buyers. But what about marketing and exposure?
If price were the only key to selling, real estate would be easy. Price is not the only factor in a successful sale; pricing, location and condition, along with marketing to reach qualified buyers, are critical as well.
Also critical is the Internet as most buyers nowadays will make first impressions online, so your listings being prepared for online viewing is imperative. Staging and redecorating, along with the use of professional photography in listings, are great tools to make your first impressions lasting impressions.
The second marketing challenge is distribution. Who drives internet traffic? While online presence is great, will your property be viewed by all potential buyers? You must develop a strategic marketing plan with search engines to ensure your property’s exposure in all of the right places.
Local exposure is no longer enough with the growing use of technology in real estate! As you know, the price is always the very best marketing tool, but reaching the largest pool of buyers through marketing will ultimately increase your statistics and guide your listings to successful sales. And we don’t just want listings in the drawer - we want them to sell and move out of the drawer!
Ultimately, the seller chooses the listing price based on their understanding of the data. We must help sellers understand that they can’t list and sell for more than a buyer is willing to pay.
Commit to giving customers an honest valuation in hopes of keeping their heads out of the clouds on price … and the results will tell the tale.
And that makes pricing the home right both an art and a science.
Marcus A. Wally, MBA, is an active Florida REALTOR® in St. Augustine, Florida. Marcus is the founder and broker of New World Realty, which also manages coaching and facilitation of education classes around the world. Marcus earned his MBA from the University of North Florida in Jacksonville. He can be reached at (904) 669-1081 or by e-mail at marcus@newworldrealty.com.