Worth vs. Listing Price

By
Real Estate Agent with Trademark Realty Group of Palm Coast

Very often when people are approaching me about selling their property they ask, "Ok, what is my property 'worth'?"  'Worth' is a very misleading concept and very often confused.  'Worth' is often confused with appraisal values and personal factors.  'Listing Price' is the real question.  'Listing Price' is driven by what people are willing to pay for your property at any given point in time.  This is mostly driven by sales in the immediate area of properties with similar makeup and features.  'Listing Price' is extremely important to reaching the goal . . . selling the property.  There are pitfalls that many fall into when it comes to the "list price":

  1. Upgrades.  There are many types of upgrades (i.e. pools, floring, windows, etc.) to a property, but the common misconception is that they contribute equally to the list price with what the owner paid for the upgrade.  For example, a $25,000 pool should add $25,000.  Not true.  The "value" of the upgrade is of 'worth' what it means to the buyer.  For someone not interested in a pool, but it's a "nice thing to have" the pool doesn't add "value" to their buying decision.  So what do upgrades do for a seller, they add attractiveness to potential buyers and can add some onto the list price, but not total price paid for them. 
  2. We will just lower the price if it does not sell immediately.  Not the best strategic move especially in a highly competitive market with a lot of properties for sale.  For one, consumer behavior shows us that people are not coming back to a property they don't have an interest in.  Therefore, if the price is not within their range they will move onto the next.  Second, price reductions can create the perception that there is "something wrong" with the property.  The thought process with this is that others must have seen it and weren't willing to buy it, what did they see that's wrong. 
  3. That's my price and I'm sticking to it.  Real Estate is all about offers, and sellers must be open to reasonable offers if they want to sell.  I am not suggesting anyone should ever just take what is offered.  Offers can be "unreasonable".  The ultimate decision is always the seller's.  But flexibility is very important.  We got pretty spoiled, I think, a few years ago when a property would go on the market and sell at the list price a short time later.  That was very abnormal, but has never been the norm.  Negotiating is back, and we have to be open to it.
  4. Pride.  We all take pride in our properties, and rightfully so.  A lot of our heart goes into where we live.  But when it comes to list price, again, it is about what others are willing to pay for your property in the area.  It's difficult, but one has to approach the pricing decision objectively and open to the information presented to them that goes into determining the price.  
  5. Every situation is different.  We hear alot about how the neighbor's house sold for$xxx,xxx and that is what the person expects to sell their's for.  99% of the time, there very obvious reasons for this namely different features that the subject property doesn't have.  It's not all about square footage and the number of bedrooms and bathrooms. 
  6. What's owed.  What someone owes on a property cannot go into what the list price is.  That is a factor in the determination of whether that point in time is a good time to sell or not.  Again, it's about what others will buy at. 

  Additional information can be found on my website under the "Selling Adivce" & "Buying Advice" sections.  complete with video from other experts at HGTV.  Visit www.KathyWestRealtor.com

Kathy West, Realtor
Exit Realty First Choice
Palm Coast, FL

 

Posted by

Kathleen West, Realtor
Trademark Realty Group of Palm Coast

416 South Central Ave Flagler Beach, FL  32136 | Office: (386) 446-5930 
Email:  Kathleen@PalmCoastHomeShow.com
www.PalmCoastHomeShow.com

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Comments (25)

Christopher Smith
TREGO REALTY - Cedar Rapids, IA
Huge difference between listing price and worth.  Just like you said, worth is emotional, listing price is not.  Great post Kathy!
Mar 30, 2007 07:06 AM
Terry McDonald The McDonald Group
TerryMcDonaldRealEstate.com, LLC - Charlotte, NC
Brokers NC/ SC

All the above make sense, but a few years ago, when Florida property prices were climbing by leaps and bounds, that complicates things doesn't it? I am interested in your Florida "bubble" market and and anyone else's comments on how you price fast appreciating property... NO Not entirely hypothetcial, there are a few markets in our city that appreciated over 10% last year, and this years listing prices reflect it... but I wonder if they should, and I have a buyer and it will be interesting to see how much he is willing to pay here.

e-mail about Palm Coast to follow

Mar 30, 2007 08:21 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Great points, Kathy. Sellers ALWAYS ask the "worth" question. Great explanation on some key issues. Upgrades can really vary, with kitchens and baths adding the most value in general, especially if it is a significant improvement. Values do vary by region, as the NAR survey has shown. Unfortunately sellers think that can simply tack on the price of what they spent on all their improvements to the price. Not!

Jeff

Mar 30, 2007 12:33 PM
Michael Delp
Mortgage Pro - Telford, PA
very good information. People don't always understand that if they redo their kitchen. and it costs $25,000. that they will add that much to the value. Not so. truth is, they already had a kitchen. it will improve the property but not always as much as the sellers would like.
Mar 30, 2007 01:11 PM
Kathleen West
Trademark Realty Group of Palm Coast - Palm Coast, FL
Flagler County & Palm Coast Realtor
First of all, thank you to everyone for your comments.  Terry makes a great point above pricing in fast appreciating markets.  All I can say Terry is be prepared and be cautious.  Because there will naturally come a lull since prices will max at one point and grwoth will naturally slow.  At that point prices will come down.  It is very important at those times to get grounded and realize there will be an end and have a plan for the future.  As far as pricing now, again it goes by what all the normal factors but watch those who want to get too greedy.  Remember your reputation can be on the line and those that buy high may be looking at you in the drop.   
Mar 30, 2007 01:11 PM
Val Allocco
Staged 2 Sell New York & Long Island - Northport, NY
HSE; ASHSR - Home Stager, for Manhattan, Brooklyn & Long Island

Kathy,

You are SO on the money!  This is one of the best explanations of selling in today's market that I have read to date!

Now, if we can get this information out to the general public, that would be a beautiful thing! Today's sellers need to be educated about the shift in the market and what is realistic!

VAL

Mar 30, 2007 01:54 PM
Desiree Daniels
RE/MAX Tri County - Robbinsville, NJ
great post - well written... definately something to pass along to clients.. thanks for sharing
Mar 30, 2007 01:59 PM
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK
List price is what the listing agent expects the property to be worth......worth on the market to potential buyers. Good read.
Mar 30, 2007 02:23 PM
George Tallabas
RE/MAX Advantage - Nampa, ID
Idaho Real Estate
Thanks Kathy...It is really important for us to keep our sellers informed and up to date with changing market data.  I send out market reports every month and it helps me immensely.  I have even had sellers call me and authorize me to drop prices based on the data I sent them.
Mar 30, 2007 02:35 PM
Chris Tesch
RE/MAX Bryan-College Station - College Station, TX
College Station, Texas Real Estate
Excellent post Kathy!  Sellers can be unrealisic at some point and need to know that a misstep at the time of listing can cost them in the long run
Mar 30, 2007 03:50 PM
Ryan Hukill - Edmond
ShowMeOKC Real Estate Pros of KW Elite - Edmond, OK
Realtor, Team Lead
Excellent post, Kathy! I find myself often having the "It's not about what your house is 'worth,' it's about what it will sell for" almost daily. Educating our sellers on the difference though can make the difference between a difficulat and a cooperative selling transaction.
Mar 30, 2007 04:41 PM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Kathy,

Good post, For me I am always battling the new investor as they make a list of all the Light Bulbs they bought and The cans Of Paint they used to try to come up with a Sales Price.

I always tell them They should have done that analysis before they made the offer.

For People who have lived in the house for some time I allways council them on improvements made by telling them that the improvement upgraded your home to the current comps. It did not elevate it beyond that.

Mar 30, 2007 04:54 PM
Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876
That is the $60,000 dollar question? Who determines the list price? Is it you? Is it the Seller? or is it the Market? I guess all 3 play a role, and who cares what it's worth, you'll never find two people that agree. Just ask the seller, then the buyer, then the lender, then the appraiser, then the homeowners insurance, and last ask the IRS? I bet you get ALL DIFFERENT ANSWERS AND AMOUNTS. (LOL) So how much is that listing worth? Hmmmmmmmm... Great post, made me think! (i try to do that once in a while ya know) grin
Mar 30, 2007 08:15 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
HI Kathy, Thank you for the informative post.  I have heard part of what you wrote here, that they will start off the listing price high and they can always reduce it...by which time, as you've stated, they've already lost potential buyers.
Mar 30, 2007 11:01 PM
Nick M.
Certified Residential Appraiser- West Palm Beach Real Estate - West Palm Beach, FL
Realtor-Appraiser in West Palm-South Florida Real Estate Appraiser

Hi Kathy. congrats on your star and feature!!  i liked this post and it's analytical-ness (is that a word? :)  although I can't say that I agree with all the statements, especially in the beginning, it's nice to see a REALTOR(R) thinking a little bit like an appraiser when it comes to pricing.

i'm curious what you're referring to in #5. location or view? just a thought.

This is a great start Kathy.. keep your thoughts coming and keep posting! I'm subscribed now :)

Mar 31, 2007 01:06 AM
Paul Korodaj
Overland Park Real Estate :: Keller Williams Platinum - Overland Park, KS
Overland Park Real Estate

I've had sellers tell me they wanted to increase their price a few thousand just for painting.  Fun blog...thx 

 

Mar 31, 2007 01:18 AM
Ryan Hukill - Edmond
ShowMeOKC Real Estate Pros of KW Elite - Edmond, OK
Realtor, Team Lead
Now THAT'S funny. When I see a listing where the price has actually increased, I just want to ring the listing agent's neck. What are they thinking???
Mar 31, 2007 02:06 AM
Debbie Cook
Long & Foster Real Estate, Inc - Silver Spring, MD
Silver Spring and Takoma Park Maryland Real Estate
I tell my listing and buying clients that a house is worth only what a buyer is willing to pay AND what a seller is willing to sell for.  No one can tell you what a house is WORTH, but the market will TELL YOU what it's worth.
Mar 31, 2007 07:19 AM
Diana Corcoran
Berkshire Hathaway Home Services Hudson Valley Properties - Rhinebeck, NY
Rhinebeck Real Estate
Kathy: Thanks for a very informative post.  As a new agent I am going to commit these points to memory for using when questions arise at listing presentations. 
Apr 01, 2007 12:29 PM
Dionne Morgan
Realty World Solano Realty - Vallejo, CA
Broker REALTOR ,GRI, e-PRO
Thank you for linking both articles. Great reinforcement of the basics. Both articles was well written and text book ready.
Jul 23, 2007 07:04 PM