Most people have a sense of what they’d like to get for their home. Pricing a home isn’t the hardest thing, but it is the first thing. Once we have that starting point, we can adjust from there.
Think about pricing as a balancing act. When walking across a high wire, the aerialist is constantly making adjustments. Seller and agent work together to do the research and come up with a price range prior to marketing the home, and then they react in real time to market feedback.
Pricing a home starts by looking at what other houses in the community have sold for recently. Real estate agents and appraisers call these comparable properties. We collect them into a report called a CMA (comparable market analysis). By looking at what similar homes have sold for, sellers can start to get an idea of what price people are paying for homes closest to their own.
Where a seller prices a property is where they position themselves on the market. We do some math and figure out the average price per square foot of home in your community. It’s a blunt tool, but useful. There is a range, homes that are new construction or effectively updated will command a top of the market price. Homes that need work do better when they position them selves at the bottom of the market. By bottom of the market, I mean a lower price per square foot.
One thing you can count on is that everyone you know has a firmly held opinion on what works in pricing homes. A few I’ve heard along the way that are all worth considering include:
Underprice a home to create demand. The process of effective pricing starts with entering the market where there is the most volume, create a competitive bidding environment that actively sets the houses best price.
Price the home higher than what’s recently sold, but lower than the other homes currently on the larger market. I don’t mind a trial balloon price.
There is a story in our industry that sellers will overprice the home, it will sit on the market and grow stagnant. If the home doesn’t sell quickly then buyers will get suspicious and start offering low bids.
The biggest problem isn’t starting too high, it’s not reacting to real time market feedback. A trial balloon price is okay, and sometimes in our market we get buyers who are willing to pay above market price to live in a good location.
When we work together to come up with a price it’s a secret price between agent and seller. We confirm our price with the brokers open which provides valuable agent feedback. Then we come on the market at a higher price, but react based on traffic and offers.
And that’s how we begin.