PRICING TO SELL

By Jerry L. Kalman, Realtor®

RE/MAX United, Bonsall, Calif.

            Pricing your home to sell under any market conditions represents a challenge, but in a buyers’ market the task turns down-right daunting.  Add to the current cool-off in overall real estate activity a seasonal slowdown in the fall and winter and you increase the reasons to a primary strategy in place to price for a sale of your property.

            The starting point?  Your objectives.  Do you want to maximize your investment, sell quick to move on or some combination of the two?  Perhaps have a new job in another market.  A lifestyle change has occurred.  Your tax status requires adjusting your real estate portfolio.  Or any of hundreds of other reasons.  Let your realtor know your motivations and what you want to accomplish.

Second, factor how the market performs in Fallbrook and Bonsall, or wherever your property may be.  North San Diego County real estate consists of several micro-markets and price-setting in these two inland communities at a strategic location across the line from southwest Riverside County become a sophisticated art more so than an exact science. 

Consider as you analyze current conditions the psychology of the market.  Just because the market on the surface appears quiet doesn’t mean your qualified buyers want to sit on the sidelines and wait for blatant positive signals in the media that prices might be poised to go up.  A buying frenzy such as we saw in 2005 appears unlikely over the near term.  Large inventories here and elsewhere provide buyers with many choices throughout the region, which makes it all the more imperative for sellers to make their home stand out from the competition and present the best value for appraisers.

Hard evidence from market stats tell us buyers still buy here and at a decent clip.

Almost all realtors compare your property against similar homes active on the market, in escrow and recently sold.  These comparative analyses tell us time and time again buyers stir things up even in slow markets.  They see what realtors see: active listings represent your competition; those in escrow as properties with features that appealed to someone in the market; and homes sold within a recent timeframe become reference points for buyers, agents, appraisers and lenders.

With the Internet, accessible MLS data and other new technologies, buyers know more about market conditions than ever before.  They have hard, quantifiable information from online services about comparables and markets, and this makes buyers today often more current on market conditions than sellers realize. 

Local knowledge and tools of insight from a realtor within the market thus become all that much more critical.  Many of us use a series of metrics that begin with average price per square foot for comparable active, in escrow and recently sold homes; and then recommend adjustments up or down based on the presence or lack of unique factors that affect value.

Foremost among those unique factors?  You guessed it, the tried-and-true: location, with all its nuances.  Locational issues still turn more buyers on and off than any other single aspect of home selling. 

Beauty and the Beholders’ Eye

            Once beyond geography, intrinsic issues take over.  Remember, just because you (and perhaps even your agent) see your property value one way does not mean the market shares your opinions.  If you price too high, the market lets you know with either low-ball offers or, sad to say, no offers.  A few unacceptable offers or even an absence of nibbles  in concert with minimal showings tells you and the market the home has a problem or the listing has stalled out and appears stale.  Worse still, it disrupts an owner’s plans for moving on, which often leads some sellers to panic. 

            All too often, in those moments of panic, sellers kill the messenger.  They fire the realtor that brings bad news late in the game about why the home has hit a wall in the market after the agent explained many times over about the wrongness of the price, sadly from the moment of listing on down to the moment of truth when the seller decides to take draconian action. 

Realtors can only do so much in the face of an improperly priced home.  No amount of magic or legerdemain can make up for a listing that goes stale. 

Third, after the two of you arrive at a preliminary price that reflects your needs and market realities, figure out how you can sweeten the deal to stand out even more from the active competition.

Options to consider include: 

1)         Start out with a price below that of the competition

2)         Increase the value of your home

3)         Use scheduled price changes

4)         Offer to pay some or all closing costs

5)         Use time-out incentives to stimulate interest and create a sense of urgency

6)         Provide other extras such as pre-payment of HOA fees, upgrades to kitchens and baths (they should be done before putting the home on the market, though!), a new big-screen TV or even small car, leaving the house furnished as is (as often done in second-home areas like Palm Springs), stage the home with furnishings that convey to the buyer, or even fund some level of redecoration up to a certain amount.

Active participants in real estate know that the age-old strategy of pricing high with the intent of coming down no longer works.  With large inventory overhangs, buyers look for reasons to weed out those that don’t fit their parameters.  Because price represents an important up-front issue this aspect takes precedence over other factors.  Realtors maximize their time in the field and discriminate against properties with bloated prices, often in their initial search of comparables. 

What about a downward price adjustment late in the listing period?  Many in the business view a seller’s hitting the discount button after the home has been on the market for an appreciable period of time as too-little-too-late.   And tiny little incremental changes send the wrong signal to market, as well. 

So, Plan A calls for a careful assessment of the home’s marketability against current market preferences.  Once you factor in today’s realities, then look for ways to put the best foot forward and steal the thunder from the competition.  Consider incentives up front to sweeten the pot and make sure your realtor communicates your unique and marketable property to the market. 

Periodically review with your realtor your progress: metrics on traffic and showings vis a vis competing properties in the market.  Once you have your strategy and benchmarks, dial in enough flexibility to go with Plan B when/if Plan A fails to achieve your primary objective.