When it comes to selling a home, almost every Phoenix & Scottsdale seller’s goal is to eek out as much money from a buyer as humanly possible. Not that I blame them, but that desire to maximize profits can sometimes sabotage the primary goal.
For the last ~6 mos, I’ve watched asking prices, not home values, increase at a dramatic pace. Conversely, the number of price reductions, and days on market have also increased. The peak for the median sales price in Scottsdale, from the start of January 2013 came in June of 2013 at $254,000. Today, in February 2014, that same stat is $220,000; a reduction of 13.4%. What gives?! FYI- the “median” is defined as a value in an ordered set of values below and above which there is an equal number of values or which is the arithmetic mean of the two middle values if there is no one middle number. This is not the average. The reason we don’t use the average is that high or low sales can skew this figure and make the statistic less meaningful.
While, the media (nationally and here in the Valley of the Sun), until very recently boasted double-digit appreciation gains, not much attention was given to buyer demand and the actual supply of inventory, or actual homes on the market. Unfortunately, demand has declined steadily and supply has increased steadily, which if you are familiar with the basics of economics, does not do so well for home values.
What’s a seller to do?? Don’t despair, it just means the days of “try it, you never know” are probably not your best option. Sure, there will be sellers who will still follow this line of thinking, but it doesn’t usually pan out so well for them. Pricing your home correctly is more than deciding whether the last 3-digits of the price should be $XXX,000, $XXX,900 or $X,999… (in my opinion these options usually make zero difference).
Instead, follow these suggestions for a more expedient sale:
1- Find a qualified REALTOR® who has applicable experience in your neighborhood (Arcadia, DC Ranch, McCormick Ranch, Paradise Valley, etc.) to represent you through the sale process! I know many of you will be prepared to represent yourself, but what you don’t know can hurt you. Decide whether you want to find out the hard way what our work entails. While you can obtain a real estate attorney to guide you, they may not necessarily be able to navigate you through the entire process (i.e. pricing, marketing, home inspection, transition out, etc.).
2- Determine the market value of your home and price it about 5-10% above that. The definition of “market value” is what a buyer is willing to pay and a seller is willing to accept, not under duress. The way to find the market value of your home is not by going to Zillow.com and seeing what your Zestimate® is. Contact a qualified realtor® (me!) to look up recent comparable sales (called “comps”), not the prices sellers are asking for their homes today. They are not one and the same.
A comparable sale typically went under contract within the last 3-4 months, is within about 1-1.5MI of your home, is ~+/- 10% of your interior square footage, is similarly finished with respect to the quality of construction, flooring, kitchen, baths, and has a similar # of bedrooms/baths, etc. It should also be on a comparably sized lot. You won’t want to compare a home on a 1/4AC lot to a home on a full AC, unless you know how to properly make adjustments.
Pricing your home above that 5-10% range might get you a higher price, but if that buyer is using financing, remember it still has to appraise!
3- Share every improvement you know of in your home with your REALTOR®, including the costs you paid for said improvements. The small upgrades you made on insulation, or 2×6 construction, are not visible to the naked eye, but can add a decent amount to the value of your home. Have a smart home system that ties into your alarm and can be controlled with your cell phone? For the technophile buyer, this can be huge! The same goes for your soft water system, upgraded A/C units or hot water heaters that were recently replaced, etc.
I personally believe that listing a home with this list of improvements adds tangibility to the value of a home for a buyer and have been able to add 10’s of thousands of dollars to my sellers’ contract sales prices by documenting either improvements or personal items (or both!).
4- Share every drawback to your home. Not disclosing and factoring these drawbacks to your home when setting the initial price will most surely lead to disappointment (and potentially a lawsuit too!). Some of these drawbacks would include having a home: in a superfund clean up site area (toxic waste), in the proximity of an airport, in an HOA that is going through litigation, a previous flood or fire (yes, these things can be discovered by the buyer without you sharing them), on a septic system in an area that is primarily served by a city sewer, and deferred maintenance, especially if it is not obvious (again, HVAC systems, roofs and other big ticket items).
5- Get pricing feedback from showing REALTORs®. If a REALTOR® is working with a serious buyer, they will usually have some knowledge of how well a home is priced. If they feel a home is priced incorrectly, these REALTORs® will usually let you know. The key is to actually follow up and ask for it.
6- Stay on top of the competition. Did that home down the street from you that’s the same model just sell? You will want to know how much it sold for and whether there were concessions from the seller to the buyer to get the sale done. Did 2 other competing listings just lower their prices leaving your home as the most expensive option, but not necessarily the nicest? It’s time to take that into consideration. The newer the sale, and the more similar it is to your home, the more relevant it is to pricing your home.
Buyers are ALWAYS looking for the value proposition. I’ve never had a buyer come to me and say, “I don’t care what it costs. I can pay for it.” Whether it was a first-time, sub-$100,000 buyer or an astute investor, seeking a multi-million dollar home they’ve usually said, “I/we want a good deal”.
Your REALTOR® should be watching the market for you. If he or she doesn’t, maybe they are not focused on selling homes- they just list them. I’ve personally set receptive clients up on automated searches while their home was listed so they would be aware of every new, competing listing that came on the market or price change. Some of those clients came to me and said, “MLS#:XXXXXXX just lowered their price, should we?”
7- Make adjustments to the price. While it makes more sense to price close to market value the first time than it does to list high and reduce, making no changes after you’ve priced your home incorrectly is a grave mistake. Buyer won’t usually fault a seller for reducing the price quickly. However, a buyer may regard a seller who has never made a price correction throughout the course of a listing, even if the home is clearly overpriced, as “not serious” or “out of touch” and just disregard the home all together.
And though this makes me nuts, many buyers are not willing to offer just what they are willing to pay. Instead, they wait until a home is within a comfortable striking range before pulling the trigger. This completely defies logic in my opinion, but it’s reality.
8- Repeat steps 5-7 every 3-4 wks, again and again until sold or until you are no longer willing to sell.
I truly believe that you will know if a home is priced well in a few ways- there are multiple showings within a given period of time and offers come in. If there is no other major objection to contend with (which again can usually be addressed with the price), this will hold true. If 2-3 weeks have gone buy without a showing and even more time has elapsed without an offer, it’s usually time to make a change. Seasonality can have some impact, but if it’s spring, the peak for buying and selling activity, this usually will hold true.
While you can offer REALTOR® bonuses, buyer incentives and change the pictures and listing details a million times, changing the price to be in line with the current market value is usually the most effective solution. If you’d like more detail about any of this info I shared, remember, I’m only a phone call away!
Would you like some more info about selling your home? Please visit my “Seller’s” page.