But I Think My Home Is Worth So Much More!

The price is right– or is it?

A too-high price can be risky. Make this mistake, and the home could be overlooked by buyers, resulting in fewer showings and fewer offers, only one offer or, in the worst case, no offers at all. That leads, in the end, to a lower sales price. The “danger” to over-pricing is you never get a second chance to make a first impression, and when buyers see a property has been on the market for a while, the first thing they think is: What’s wrong with that house?”

That negative impression means the house might be on the market longer than it would have been if it had been priced realistically. A longer time on the market, is “death” to getting a higher price because rather than compete with one another, buyers will show up to negotiate with the seller. Agents can help sellers understand why their home might not fetch the price they want or feel they “need” by putting them in the buyer’s shoes, figuratively speaking. The question to the seller becomes: ‘Do you think buyers are going to pay what you need or what they think your home is worth? And when you’re buying, are you going to pay what you think the that home is worth, or what that seller needs? But sometimes reason doesn’t always make the case; so we add in data.

APPRAISAL TRUMPS PRICING

Another risk of over-pricing is that when a willing and able buyer is found, the sale might get snarled up by the appraisal if the buyer needs bank financing to close. That can be a real issue, and is an element of the negotiations that cannot be overlooked. Rising home values have reduced the incidence of problematic appraisals, but it hasn’t gone away. One reason is that some short sales are underpriced and may have been negotiated months earlier, even though they recently closed. To ward off appraisal woes, your listing agent can meet the appraiser in person at the property, so they can offer a perspective on the data and present comps they believe support the purchase price.

SOLD OR ACTIVE COMPS

The appraiser’s use of sold comps to determine value is one reason why some agents weigh closed sales more heavily than active listings in pricing a seller’s home. Still, some markets are so hot that sellers can price aggressively while knowing the risk of an appraisal showdown if the buyer needs financing.

Sold comps are important, but active listings are the direct competition for the seller’s home. If we know the direction prices are going– up or down– then the question becomes how are we going to price compared with similar homes that are for sale? Still, in cases where prices are on the rise, there are limits, so it’s important to make sure sellers are very aware that the appraiser’s valuation might be less than they expect or want and the buyer is willing to pay.

WHO SETS THE PRICE?

Price; It’s the reason a house sells, and the reason a house doesn’t sell. The proverbial jury might never deliver a verdict as to whether Realtors should accept a listing the seller wants to over-price. A good agent won’t pressure sellers to set a price they feel is optimum, though they will (or should) make an effort to document their suggested price. If after all of that the seller’s asking price still isn’t within the realm of possibility, then it becomes a judgment call for the agent. One can either take the seller’s direction, possibly with a proviso that the price will be reduced if they haven’t accepted an offer within a few weeks; or, simply pass on the property, knowing that they will invest a lot of time, effort, and marketing dollars on a property where the owners are inflexible on price. Bottom line; the sellers are in charge and they are the decision makers on price. As an agent, being right about price can also have its downside. There’s nothing worse than putting a price on a property sells immediately, because inevitably the sellers think they should have listed it higher.

MarinoRealEstateSometimes sellers do get the seemingly crazy-high price they want. Maybe a buyer has lost out on 10 offers, and they are tired of making offers; or a cash buyer goes way over the asking price just to get the property. It happens from time to time; especially in the recent past. However, nowadays it has become unusual, and not something that one can bank on.

Agents don’t have to work with a seller who’s unrealistic on price. It can be smarter to walk away and focus on other opportunities. A middle ground is to pre-negotiate a specific price reduction that will take effect at a pre-set time if the home doesn’t sell at the price the seller wants. That can be accomplished by having a price reduction built into the listing agreement so if you do have to go back and re-price, it’s a conversation you have already had; which minimizes or even eliminates the disappointment for the seller that may come with the realization that the price we are at, is not the price buyers are willing to pay. Getting that adjustment in place in the first two to three weeks will still allow a seller to have an opportunity to take advantage of the newness of the property being on the market.

CAN YOU PRICE A PROPERTY TOO LOW?

The short answer is, “not really;” but there can be consequences for doing so. While they might not articulate the tactic of deliberately under-pricing their home (though some actually do), some sellers openly declare their desire for a “bidding war.” One risk of under-pricing is that it can generate resentment as numerous buyers and the agents who submitted their offers at (or even in some cases, over the asking price), are disappointed when they lose out on the property. Sellers understandably might not mind, but the fallout for their Realtor (and by extension, the seller) can be negative, because a good agent can usually identify an underpriced home, and advise their (buyer) client in advance; which may result in their passing on your home entirely, rather than engage in a feeding frenzy. Can you list too low? Today’s market is pretty fluid, so ultimately you’re likely to get to the right number. Of course the key is whether that number is one that you, the seller, are prepared to say “yes” to.  (Source: Real Estate Magazine; Mark Marino)

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Author:Marino Real Estate

Specializing in residential and commercial real estate sales for the better part of a decade, my approach to real estate involves establishing a trust with my clients, that contributes to the ultimate success of our transaction. Whether it is a personal residence, or an investment property, I am committed to negotiating the best deal for my clients, and have enjoyed a history of meeting the important and unique needs of the many clients which have entrusted me with thier real estate goals.

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