Pricing for the seller

 To determine pricing first one should determine present market value.  When assessing residential property four major factors account for I'd say about 75% of the value: 

Location · Living area size · lot size· condition/renovations of the property.

Other factors that come into play are the number of bedrooms, baths, bonus areas, in-law potential, color scheme, floor plan, pool, fireplace, single or multi story, attached or not plus more.   Every Area has their own value factors.

 These factors need to be compared to recently sold homes in the area.  The terms and conditions of comparable sold homes are important.  To accurately determine the value you must know if the seller credited back any money for repairs or closing costs.  Did the seller carry back a second loan or even a first? You must know if the homes sold had a clear termite report or how much it would cost to clear it.  This information is not public knowledge but a good Real Estate Agent can usually obtain this information.  All this will help obtain the current market value.  Also market trends must be considered.  Is the market heading up or down since these comparable properties sold?  How long are homes staying on the market before selling. By the way it makes no difference if the seller was a bank or an individual. It is just what the home sold for.

 After reviewing all these factors, you compare your home to the comparable sold homes and adjust the price appropriately.  Ah ha... "Adjust Appropriately" is a very loose and vague term.  It is subject to one's opinion.  There is no set rule.  Cost per square foot is easy but the larger the home the lower the cost per square foot.  The reason is adding a bedroom or family room is not as costly as the plumbing and electric required for a kitchen or bath.  One simple way to adjust for renovations is get the cost of the renovation and then pro-rate it for age, and condition.   One person may be willing to pay more to live near a main street with public transportation when another is not.  This is very subjective.  You must look at it from the majority of the people's point of view.  What might be wonderful for you may not suit everyone else's taste.  Buyers must also look at it that way.  At one point they will be selling and should look at the purchase with resale in mind.  Next week I will discuss Home Pricing for Sellers and Offer Pricing for Buyers.

 Pricing homes to sell.  Please note I said "To Sell" not just "For Sale". Correct Pricing in today's market is more important than ever.  Overpriced homes do not get viewed.  They remain on the market for a long time, become stale and even after chasing the market with price reductions usually sell below market value.  Buyers think something is wrong with it; the sellers are frustrated and desperate. 

For sellers there are 4 prices methods you could choose: 1) below market to create an auction with the idea of selling above asking, 2) low part of the suggested range to sell in the average days on market or less, maybe over asking, 3) high part of the suggested range to have room to negotiate and sell in a longer period of time 4) overpriced so you won't be disturbed with people coming through your home but your home would be "For Sale." 

The choice should depend on your market and your needs.  I am a firm believer that every month your home is not selling in today's market it is costing you at least 1% of the purchase price.  I say this because if you sold it you would be earning money in the bank or at least you will not be paying your mortgage.  Don't forget you are paying property tax and insurance and maintenance while you are trying to sell your home.  Also if you are in a declining market you are losing even more for each day your home does not sell.  Time is money and don't forget it. 

 Back to the pricing scenarios.  I have seen #1 work well, but I question the ethics behind it.  In my opinion #2 is the best for today's market in the Bay Area. There are a lot of buyers out there and if you really are priced low, offers will come and determine the market price.  #3 works well for individual cases.  If you have a lot of time and money to burn #4 is what you should choose.   It is important not to price your home based on what your neighbor got for their home 2 years ago or what your neighbor is trying to get today. It must be priced using recently sold comparable homes in your immediate area and the market trends.