Helpful tips for pricing your home in a buyer’s market
Mar 25th, 2009 by Catherine Duncan
Getting ready to sell? The more you know about conditions in your local market, the better your chances of getting the best possible price for your home.
It’s tough being the seller in a buyer’s market. But you can improve your odds with the right research.
In many cases, making a smart deal and getting the best price come down to studying your market and being an educated seller.
1. Recognize that housing markets are local.
Home prices are like the weather — very different in different areas.
In many markets, home prices have actually gone up from last year, says Dick Gaylord, president of the National Association of Realtors.
In addition, demand will change depending on the price range and even the neighborhood. What you need to know: What’s the demand for a house like yours in your area?
It is important to look at what’s being sold and at what price.
Look at comparables for similar houses. Study prices and sales for one year ago, six months ago, three months ago and current numbers.
What are the trends? Are prices going up or down — and by how much? How many days are homes staying on the market? If they are on the market longer, how much of that could be seasonal? In many areas, spring and summer are the busy seasons.
Pay special attention to the difference between the list price and the sales price. That is, look for a meaningful relationship between list price and sales price. Perhaps most homes are selling for 5% less than the list price.
An agent who works the market will be in the best position” to find “the tipping point between nice, attractive and interesting — and being sold.
You also need to realize that the paperwork alone tells only part of the story. While sales and prices are public, many times seller concessions are not.
2. Analyze who is buying and selling in your market.
What’s your competition? Who are the buyers, and why are they shopping?
Do you live in a growing market with people coming in? Or are you living in an area that doesn’t attract a lot of new residents, where many shoppers don’t have to buy but are looking to pick up a bargain?
Are you competing against a flood of new houses from builders eager to sell, or are you selling a newer home in an area where most of the housing stock is older?
3. Ask the professionals.
Don’t ignore the elephant in the living room. Ask about the market conditions for your area and price range.
Specifically, ask about the “absorption rate”. What that means: In the current conditions with the current inventory, how long would it take the market to absorb, or sell, all the houses on the market?
If the supply is much larger than the demand, what would the price have to be to offset that inventory?
4. Know what your house is worth.
Have your agent do a market analysis of your property or if you are willing to spend the extra money, get an appraisal from a certified professional appraiser. Look at your comparables. Taken together, that information will give you a pretty good idea of what your home is currently worth.
5. Consider strategic pricing.
Here’s how it works: If prices in your area are dropping 1% each month, and you want to sell within the next three months, you take 3% off your price right off the bat. So if you were going to put your home on the market for $400,000, you set the price at roughly $388,000.
The upside: You’ll have the competitive edge over the guy who’s dropping his price every month, without the air of desperation. Plus, in a market where prices are falling, you’ll make more money if you sell quickly.
The downside: Predicting the market is a tough call, even for the pros. And it’s really difficult to raise the price if your market starts to rebound.
6. Evaluate whether you really have to sell now.
If you want to get the best possible price for your home and the local market is tanking see if you can delay the sale. Otherwise, in a lot of markets, sellers have to be willing to accept a pretty good haircut over what they thought their home was worth last year.
The downside of waiting: The market could decline or your circumstances could change to the point that you might need to sell quickly.
But for situations where the move is optional (or you might be able to rent the property until your local market improves), waiting is a solid option.
Just because you’ve already planted that “For Sale” sign doesn’t mean you can’t change your mind if you’re not seeing the interest you expected.
8. Assess the market where you plan to buy.
If you’re selling one house and buying another, look at the market where you plan to move. It might be that, with the housing there, it’s a great time to buy.
