By Luis Montejano, Broker Associate and Realtor in Los Angeles (Sotheby’s International Realty, Los Feliz)
Let’s say you have the choice of buying one of two flat screen TVs. One was priced at $1,049, but because it hasn’t moved off the shelves it’s been reduced to $749. The other just hit the store, and is priced competitively at say, $729. Which TV do you buy?
You might think that buying the more expensive, discounted TV is a better buy—and it may be. But many people would opt for the brand new, $729 model that just arrived. Why might they avoid the discounted TV? Instead of thinking they’re getting a great deal, they might worry they’re getting something no one else wants. After all, if it was a good TV, then why didn’t it sell at $1,049?
When people look at Los Angeles real estate prices, the same applies. There is an advantage to pricing your home correctly, right out of the gate. Overall, homes set at competitive prices right away tend to do better when compared to homes that are priced too high and then get reduced: they sell quicker and generate more responses from potential buyers. This is a good thing, because not only can a competitively priced home sell quickly, but it can potentially generate a situation where more than one buyer is competing for the house—and you actually get more than you asked for.
Of course, homeowners who try and get the most for their home sometimes get it, even if they need to reduce the price a bit. But if you want to maximize you potential for selling quickly, competitive pricing is key.
Determining that price is actually not that difficult. What you’re looking for is called the Fair Market Value of your home. FMV is what the current market determines the home is worth at the time it is listed. In other words, it is the amount of money a buyer would be willing to pay to the seller under normal circumstances at the time of sale. But how do you determine the FMV of your home? You can’t just go around asking people…
There are a few options: you can get an appraisal, attend open houses for homes similar to yours, or even check online to try and determine the FMV of your home. However, the best way to get an accurate estimate is to get a comparative market analysis, or CMA. Typically, a CMA consists of a comparison of recently sold homes (or homes currently on the market) in a 3-5 mile radius from your home. Based on the CMA, you can ballpark an estimated FMV for your own home. And once you have your FMV as your starting point, you can then set the price of your Los Angeles home based on your individual needs, the urgency of sale, etc.
Remember, the sale of your home will likely be the most important sale you’ll ever make. And you want to sell it for as much as possible. So make sure you do your homework and set a price that you’re happy with—but make sure it will get the buyers in the door.
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