I periodically get asked: “Why I don’t give sellers an exact price to list their home for when I initially talk to them?”
To put this in perspective, I typically talk to a potential seller several months before he actually has the home ready to be put on the market and sold.
My answer is that I don’t give an “exact” number because:
A) I don’t know until sellers have finished the work and told me that they are ready to put the house on the market if they will do everything I suggested or nothing. That can make over a $50,000 difference in the value of a home in his subdivision. That is why I routinely provide sellers with the reports on the comps not just the raw numbers, so they can see (based on pictures and written descriptions) what homes have sold for based on the condition and updates that the homes had. I also encourage them to schedule a time with me to go visit the homes that are currently on the market that their home will be competing against.
This allows the sellers to better decide what money and time they want to invest in the home prior to putting it on the market. Do they want to sell “as is”; do enough work to bring the home up to current code requirements so the buyers can get an occupancy permit and move in right away; do cosmetic repairs and minor maintenance (like paint, staging and minor repairs); or do major updates.
B) The housing market is very sensitive to what is going on in the neighborhood. I can give an “exact number”, only to have an estate sell a very updated home well below its true value because the family needs a faster closure which decreases the housing market in their subdivision. Or there may be several very updated homes (often with additions) that sell that bring up the values in the subdivision. When those things happen it affects the value of all the homes in the subdivision as they becomes comps for the appraisers. Real Estate is local. Banks want realistic comps (same style of home, similar features, similar square footage, etc.) from the subdivision the home is in, when they are considering approving the buyers loan. In today’s fast changing housing market, the banks often look at the most recent 3-6 months worth of comps.
If it takes a seller several months to get the home ready to go on the market, then the comps I show him at our initial meeting will be out of date, before the home is ready to be shown.
C) While I may suggest an “exact” price for a home when the seller is finally ready to put the home on the market, I am very sensitive to the sellers’ wishes. Some sellers want to use a strategy of pricing on the lower side which often generates multiple offers and a bidding war for the home, while others prefer to price higher and hope that by the time the home sells (it typically takes a home that is priced at the high end of the comps longer to sell then a home priced at the lower end of the comps). the comps available to the appraiser will support their price point. Other sellers prefer to choose a price point between the two.
At the point the home is ready to go on the market, I will evaluate:
- the changes that have been made to the home,
- it’s current condition, features and amenities
- the current comps in the subdivision (both those that have sold and the ones that are currently active and will be competing against the sellers home)
- the supply of homes that are currently on the market vs current buyer demand (the law of supply and demand makes a huge difference in what the local housing market does)
At that point, I’ll work with the sellers to determine where they want to position the home in the market and what listing and negotiation strategies they are comfortable with.