PRICE YOUR HOME TO SELL Part 5 of 5
BY JOHN OCCHI, HEMET REALTOR®
Originally posted to this BLOG
This is the final installment of a 5 part article, educating the consumer on the process of how homes should be priced to sell, in an market.
Looking back at the First Part, we stimulated the thought process by asking some hard questions - helping determine your own level of motivation. Then in the Second Part we examined the roll a REALTOR® plays in the process and why it is so important for you to choose one you can work with - one who will allow you to make the important decisions with the right counsel. In Part Three we took a look at what drives the market and the principles that make the housing market fluctuate in value.
Finally in the Fourth Installment we took a look to see what happens when a home enters the market over-priced. I just completed a short article where I cite actual statistics for the 3 Hemet zip codes and show with actual numbers how an over priced home has little chance of selling - even with future reductions.
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PRICING & the MLS
Another important aspect of pricing the home to sell from the beginning is how searches are made in the MLS. In its very simplest form, the MLS is nothing more than a big database of homes for sale, with many search variables.
Buyers on the Internet and Realtors have access to basically the same information. The data the Realtors access is more complete than what is available on the Internet.
When a search is made, the normal variables are the city, the number of bedrooms, square foot of the home and lot, perhaps what school the kids will go to and so on. Many of these are range searches, meaning they may look for homes with 4 to 6 bedrooms, when a 5 bedroom is ideal.
Price of course is a major criteria to search for in a home. Unlike the square footage of the lot or the number of bathrooms, price often cannot be adjusted past its limit. Unlike the difference between 5 bedrooms and 6, a home buyer can only afford what they have been approved for. If a buyer is qualified for a $400,000 home with a 15% down payment, it does them absolutely no good to look at homes priced at $405,000 with the hopes they will be able to negotiate down. Especially when there are so many homes available in their approved price range.
If your home is valued at $400,000 and you increase the list price by just 5% - that's $20,000 above what the home is worth. No one who is approved at the $400,000 level will be looking at your $420,000 listing - even though it may be the perfect home for this buyer. Your prized possession simply will not show up in the searches made. Remember, no one wants to waste a lot of time house hunting.
BUYING UP IN A DOWN MARKET
This is the beautiful part about a down market, even if it is often misunderstood - buying up!
Let's say you bought your home 5 years ago, or longer and you have not already taken out your equity. Let's say you paid $250,000 way back when. Last year your neighbor sold his home, which is not as good as yours for $550,000; so you thought yours was worth at lest $600,000 then.
For sake of discussion, we'll assume we have taken a 10% decrease in value over the past year, when your home peaked at $600,000, this means your home today would be worth $540,000 ($290,000 in equity before costs).
Now let's assume that you found a real gem of a home last year for $1,000,000 that would have made your entire family very happy. This is a $40,000 gift for you. Let me explain...
Yes, when you sell your home, you will receive $60,000 less than if you sold it last year. But now, because the market has dropped 10% across the board your million dollar dream home is only $900,000. Had you sold your home at the peak of the market, you would have been buying at the peak of the market.
Now, with the difference in the $60,000 hit you took on your home it equates to a tax free $40,000 windfall offset by the $100,000 hit the seller of the new home took in selling it to you for only $900,000. As an added bonus, your new property taxes will be 10% less every year, had you bought at the peak of the market.
PROPER PRICING HAS ITS ADVANTAGES
To wrap things up, let's review the benefits of pricing your home to sell...
IT WILL SELL FASTER
- A home that is priced right will sell quicker which reduces the carrying costs you have to pay every month in the form of mortgage, insurance, maintenance and other costs of ownership.
IT'S LESS INCONVENIENT
- It is so much easier to sell your home quicker. Save the energy of keeping your home in a model ready state of showing. Having a home listed for sale changes your lifestyle.
YOUR HOME WILL BE EXPOSED TO MORE BUYERS
- There are more people who can afford the market value of your home and you will be showing them instead of the buyers who are comparing your home to the one with amore legitimist higher market value.
MORE REALTOR ACTIVITY
- Remember, the Realtors control the buyers and the more excited you can make a Realtor about a listing the more activity you will generate.
BETTER ADVERTISING RESPONSE
- When price is not an issue, your real estate agent will get more calls from the advertising which will mean more showings
HIGHER OFFERS
- Buyers are much more likely to offer a full fair price offer then a home is priced right because they don't want to insult the seller or lose the home to a better offer.
MORE MONEY TO THE SELLER
- The market will produce a higher sales price if the home is priced correctly. This means you will Net more dollars and you will have less carrying costs.
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I hope that this series on the thought and process of pricing your home has helped you in some small way understand the complexities and ambiguities that must be interpreted and weighed in order to successfully price your home so it will sell - in any market, but especially know when the market is in a real period of change and uncertainty.
Like all of the articles I write, either here on Active Rain or elsewhere, I hope that you find this to be stimulating to your thought process. My articles are never meant to be anything more than a place to start to ask the right questions.
So, I welcome your questions and the thought of helping you directly with any of your real estate needs. Please feel free to contact me anytime.
John Occhi, Hemet Realtor
http://www.johnocchi.com/
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