Pricing your home to sell in a buyer’s market
There are signs of life in the Chattanooga real estate market, but we aren’t out of the woods just yet. With the economy’s stagnant growth rate and extreme care with which banks are choosing to lend, the pool of qualified buyers is not as big as it was in housing market booms of previous eras. You can still set yourself apart and price your home to sell for the most amount of money in the least number of days on the market, if you take the time to educate yourself, and work with a realtor who understands local market conditions and that has a track record for selling homes quickly and at fair market value. Here are a five key considerations for pricing your home right in the current buyer’s marketplace.
1. Recognize that housing markets are local.
Even down to a micro climatic level, housing prices vary by market. A 2000 square foot home in one neighborhood may sell for 20% less in a neighborhood right up the street. Even within a price range, there are varying market conditions — the higher the price range, the less number of people within a market pool, and the longer market time your home may experience. To understand your specific local micro climate, look at sales of comparables for similar houses at three, six and twelve months out to understand and anticipate trends. Are the prices going up or down? By how much? How many days are the homes staying on the market. If they are on the market longer, how much of that could be seasonal? Also pay special attention to — and look for a meaningful relationship between the list and the sales price. If, for example, most homes are selling for 5% less than the list price, you’ll have a more clear picture on what to expect. What is the tipping point between getting showings and ultimately getting the sale? Keep in mind, though, that paperwork does not give you an entirely clear picture. While sales and prices are public, seller concessions are not always public, even though they are a growing trend in effective pricing strategy for broadening the pool of qualified buyers. Check with your realtor to see how seller concessions are actually affecting pricing and how you might use them effectively to broaden your pool of potential buyers.
2. Analyze who is buying and selling in your market.
What’s your competition? Who are the buyers, and why are they shopping? Are people relocating to your area? Are you competing against new developments? Better schools? Lower taxes? The real estate market is driven by supply and demand. What factors set you apart from other neighborhoods, and theirs from yours have impact on what your home will actually sell for. And statistics show the closer you are to actual market selling price for your category of home, the shorter market time.
3. Ask the professionals.
When you interview real-estate agents, ask about the market conditions for your area and price range. Experienced realtors will not only be able to pull listings and provide you with history, they will be innately familiar with the ‘absorption rate’… how long it will take to absorb or sell your home in the current conditions with the current inventory. If supply in your price range is much higher than demand, a good agent will also give you sound advice on pricing to offset the over-inventory.
4. Know what your house is worth.
Talk to a handful of agents. Get an appraisal from a certified professional appraiser. Look at your comps. Don’t choose an agent because they provide you with the highest price to sell your home. An overpriced home that sits on the market and doesn’t sell at all diminishes public perception of the value of your home, if it is seen re-listed two or three times. Footprints on expired listings are out there and easy to find for savvy home shoppers, and they will be alerted to the fact that your home may be overpriced, or that you have unrealistic expectations of what your home is currently worth.
5. Consider strategic pricing.
Here is an example of how you might strategically price your home after careful examination of data and the market conditions. If prices in your area are dropping 1% each month, and you want to sell within the next three months, you take 3% off your price right off the bat. And in a market where prices are falling, you’ll make more money if you sell quickly. So if you were going to put your home on the market for $400,000, you set the price at roughly $388,000. Conversely, if you do not have time to wait three months, while your home is on the market, pricing the home at or slightly below market value will yield you faster results than a home priced to bear market conditions a few months out.
The net net…
Predicting the market is tough, even for the experts. And it’s really difficult to raise the price if your market starts to rebound. Treating the pricing of your home from a statistical and market-driven model based on actual market conditions, supply and demand, and factoring in the time you can afford to have the home on the market will ultimately serve your interests better than putting the home on the market at the wrong price.