HUD Articles

Despite the term “buyer’s market,” understand that it’s always a “seller’s market,” too. Homes are necessary, and homeownership is cherished. We do not live in caves or nomadic tents. Real estate is a commodity that will remain so.

Further, your home is unique. There is no other exactly like it. Whatever individuality you have created within your property makes it stand apart from your neighbors’ homes.

There are no set rules of when to sell because homes are not sold from store shelves based on seasonal holidays. People get new jobs or are transferred or decide to move because of family situations all the time, at any time of year.

Your home’s value will be based on the sale price of similar homes purchased recently at the time you decide to sell, regardless of season. The bottom line is that you decide the asking price of your home, either by yourself or with the help of a real estate professional.

THE PRICE IS RIGHT


A buyer of real estate is no different from a buyer of a painting or a bag of oranges. Both sellers’ and buyers’ perception of value will always have a prominent role during the sale. Perceived value and market value are not the same.

You need to know how to price your home strategically and correctly from the get-go to obtain the best price. A Virginia realty agency reported that homes in August 2013, within their first week on the market, sold for an average of 2.08% above list price. Homes that grew stale for months sold for an average of 11.53% below the original list price.

As a seller, keep two things at the forefront of your mind, as you determine listing price.

First, sentimentality has no dollar value. Although you have emotional connections to your home, the buyer does not. Most buyers being shown many properties do not expect yours to be “the one.” You will have to work to get them to that decision. Avoid letting sentiment play a part in pricing the property. Set all emotions aside during the selling process. Buyers look for cues to figure out your motivation to sell.

Next, there is also no direct dollar-for-dollar correlation between upgrade investment and market price. As previously noted, a $25,000 kitchen renovation will not bring the market price of a $275,000 home to $300,000. Don’t assume you can add that amount to your asking price and get trapped by making your home the nicest, but also priciest, home for your area.

SALE PRICE VS. MARKET VALUE


If you have a ready-to-buy, bank-qualified buyer who is willing to pay a price you will accept, that is referred to as “sale price.” It is an objective fact without influence.

This sale price transaction, once complete, will influence the market value of homes in the area. You determine the price of your home by looking at comparable local sales provided by a professional real estate agent, your property’s condition, and the current supply and demand.

What a piece of property might sell for based on features and benefits in a competitive market, and the current supply and demand of similar homes is its market value. You might value your home at a higher price than what a buyer will pay, or its true market price. Balanced markets will equalize market price and market value.

The perspectives of buyers and sellers also come into play when placing value on a home. Let’s say your home has an abundance of mature trees — a plus in your mind. But a buyer who loathes raking leaves will see that as a negative.

If you just spent $10,000 to replace your roof, you might think you can set a higher price, but buyers already expect the roof to be in excellent shape. Proximities to schools, bus routes, and medical facilities can create value that certain buyers are willing to pay for.

Buyers look for the right deal, but what they are willing to pay, or what the bank is willing to finance, has limits. Strategic pricing is your greatest tool when selling your home.

PRICING EXAMPLE


A homeowner decides to place his home on the market and must decide on an asking price. By rough estimate, the home’s market value falls between $290,000 and $300,000. Many homes are on the market.

These are some pricing considerations and approaches to finding that “right price”:

The “leave room for negotiation” approach. In this approach, the market value is “stretched,” say to $305,000. The price will not entice a buyer, but may make comparable homes more desirable. The home will most likely not sell quickly, or at that price.

The “price it according to worth" approach. This approach sees the price set right between the market value benchmarks, at $295,000. Likely, home shoppers will lump the home with like-priced homes, knowing they can buy anytime for $295,000.

The “underpricing generates interest” approach. Underpricing at $280,000 will motivate buyers and perhaps create a bidding war. But the goal of selling the home for more money is derailed.

THE COMPARATIVE MARKET ANALYSIS


When it comes to finding a buyer, pricing your home based off of comparable, real-priced sales is crucial to making the sale. The Comparative Market Analysis is imperative to pricing strategically. When you ask for one from a real estate professional, be sure to review the analysis, ask questions, and get explanations. If completed correctly, this comparison report not only gives you a great listing price, but also reduces the chance of your home being under-appraised. If you have a well-priced home, you should be showing within the first few days on the market. Offers should come within weeks.

PERCEIVED VALUE


If the perceived value of your home by a potential buyer is greater than the actual price, the more willing he is to buy. The urgency to buy disappears, the closer the price and perceived value are. This means marketing the home to match the buyer’s specific needs and desires. A real estate agent can help you know the buyer’s hot buttons, such that marketing and presentation can be tailored accordingly.