WHO DETERMINES THE SELLING PRICE OF A PROPERTY?
The Buyer! By comparison shopping, buyers determine the relative values of similar properties, and then make their offer. A property will never bring a higher price than the one that an informed, ready, willing and able buyer will pay.
HOW DO COMPARABLES OF PAST SALES AFFECT THE PRICE?
Past sale comparables, as recorded by the Multiple Listing Service, are used by real estate professionals to help sellers set a price. All properties are unique, therefore, professionals look at what buyers in the last six months have been willing to pay for properties that are similar to and in the nearby geographic area to the sellers’ property. These comparables are also used by professional appraisers to determine the current value upon which the lender bases the amount they are willing to lend on the property. A rapidly changing, up or down, market will affect these values.
HOW DO PRICES OF ACTIVE LISTINGS ON THE MARKET AFFECT THE SELLING PRICE OF A PROPERTY?
Buyers (and their brokers) will compare all available listings based on size, location, quality, condition, amenities and price. Then, they’ll make a judgment about which properties fit their needs and price point. By the time most buyers make an offer, they are well educated about the market and able to make an informed decision as to the value of a specific property.
HOW DO WITHDRAWN AND EXPIRED LISTINGS AFFECT DETERMINING A GOOD LISTING PRICE?
Withdrawn and expired listings usually represent sellers who have become disillusioned with having their property on the market or have had a change in circumstance. They may have decided to rent it for a period, or to keep it off the market for awhile so that prices might catch up to their selling price. Many times these are overpriced properties that were unsuccessful in the market place.
HOW DOES THE CONDITION OF A PROPERTY AFFECT ITS VALUE?
Buyers are likely comparing your property to new construction or to updated and immaculate homes, with new bathrooms, kitchens, plumbing, electrical and other essentials and amenities. At the same time, some sellers do not want to remodel or redecorate before selling. In these cases, the home is on the spectrum of a fixer-upper. Most buyers will only consider a fixer upper when it’s offered for a substantial discount that takes into account the cost of deferred maintenance (ie, the work required to bring the property up to date). In other words, if sellers want to get top dollar for their property, it must be in top condition.
HOW TO DETERMINE THE TRUE VALUE OF A PROPERTY WHEN PLACING IT ON THE MARKET?
Using comparable past sales, withdrawn and expired listings, and properties currently for sale, your realtor can help you determine an offering price and introduce it to the market. A testing of the market occurs within the first two to three weeks, when enthusiasm is at its highest. After that
WHAT IF THERE ARE LOTS OF SHOWINGS OVER A PERIOD OF A FEW WEEKS, BUT NO OFFER?
If there is a lot of interest, and there are many showings, but no offer, then the market has rejected the price. At this point, the sellers can reconsider their offering price. Or, keep the price in order for the market testing to continue. At a certain point, the seller must look at the market response to the price and decide on a course of action.
WHAT IF THERE ARE FEW, OR NO, SHOWINGS IN THE FIRST COUPLE OF WEEKS?
If there are few, or no, showings, there may be no buyers in the price range in the market at the time. This is especially true in the higher price ranges. If there are many offerings in the price range, but the listing is not getting any traction, usually it’s because the market has determined this price point is not right for the particular property.
WHAT IF I NEED A CERTAIN AMOUNT OF MONEY TO NET OUT OF THE SALE?
The amount that a seller needs/wants has no relationship to what a buyer will pay for the property.
HOW DOES THE TIME VALUE OF MONEY RELATE TO PRICING A PROPERTY?
“Time is money.” The quicker a property sells, the higher the selling price. The more time goes by and the more buyers that reject the property at its listed price, the more “shop-worn” it will be perceived and the lower the price will have to be to attract the final buyer. This is most evident when an overpriced property has languished on the market for months, and maybe years. Many a seller has regretted not accepting a lower offer at the beginning of the marketing period and/or not reducing the price earlier in the process.
WHAT IF I’M NOT IN A HURRY TO SELL, BUT WANT TO “FISH” FOR A BUYER AT AN INFLATED PRICE?
Sellers that are not serious or realistic about selling their listed property risk the “shop- worn” syndrome. noted above and an eroding of value of their property as time on the market increases. This means that the longer a property sits on the market, buyers realize many others have looked but didn’t buy so they expect there must be something wrong with it, even if there is now. Also, even if not true, once a property has been on the market for a length of time, buyers perceive that sellers are desperate for a sale and expect that they will accept a low ball offer.
AREN’T THERE “RICH” BUYERS OUT THERE, THAT WILL JUST LOVE MY PROPERTY SO MUCH THAT THEY WILL BE HAPPY TO GIVE ME MY PRICE NO MATTER HOW FAR OFF THE MARKET VALUE IT IS?
No.
WHAT’S THE BOTTOM LINE?
When realistic pricing is combined with effective marketing by an experienced professional realtor, like Alex Dethier, there is a buyer for every property. Any property can be sold in any market.