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Straight Talk About Pricing A Property

By Lisa Scontras

Sellers beware: If you think you will get more for a property for asking more you should know there are definite costs associated with pricing too high.

It may take you longer to sell and in today’s market, generally the longer you’re on the market, the less money you’ll get, according to Bernie Tong, Realtor and partner at Prudential Locations LLC.

“Asking a higher price does not always get a higher price,” she says. “In fact, the opposite is often true.”

Here’s why.

Home buyers approach shopping for a house just like they would approach shopping for a car or groceries –– by comparing prices.

So if your house is priced, say, at $825,000 when it should really be priced closer to $775,000, the buyers looking at your property will be comparing it to others in the $825,000 price category — fewer buyers will consider yours because it will likely not measure up.

Second, the right buyers — the ones who can afford your house— aren’t going to see it at all because they are looking at homes priced between $750,000 and $800,000.

With any luck at all, a seller will figure all this out before their listing becomes stale.

“When a listing is stale, there are fewer showings,” says Tong. “Sometimes even a price reduction does little to spur more interest in the property.And the longer a property has been on the market, the more a buyer feels they can negotiate — since they feel they have no competition.”

So how do you price your property properly, from the start?

The most basic rule is look at the comps — don’t get emotional. What your home is worth to you, considering the newly remodeled kitchen and the playground across the street, could be very different from what the home is worth to a couple who hates to cook and whose kids are grown.

“Sellers, even investors are emotional about the real estate they own,” warns Tong. “They feel that their property is special compared to the competition or the recent closed sales.”

In determining a price tag, real estate agents offer a comparative market analysis in which they look at similar homes in similar neighborhoods to see what has recently sold. They also look at active listings and pending sales.

“Pending sales will give you the most current indication of activity in a neighborhood or building,” says Tong.

She even recommends sellers go out and visit competitive properties in the neighborhood to see their condition and how they compare.

“Seeing the competition helps a seller to price their property to be competitive,” she says. “If a competing property goes into escrow or sells before yours, you’ll also have a better idea of what appeals to the buyers that are out there.”

Remember, your home may be one of a dozen a buyer checks out in a day. Make sure it’s priced right.

Beside "comp" prices, there are other things that can play a role in pricing your home:

Interest rates. Are they going up? This could cut into the pool of prospective buyers, who may wait for rates to come down again before they seriously shop for a home.

Housing market conditions. Are home prices in your neighborhood going up or down?

Economy. The local and national economy can affect your home's price. Have there been major layoffs at a large company in your community, or has a particular local industry taken a hit?

You. If you're in a hurry to sell for whatever reason, you may not have as much leverage in the final sales price.

Supply and demand. What's the availability of homes in your area? Is it a seller's or buyer's market?