How to Price a Home
A guide to determining the best price to list your home for sale
How to Find the Best Buyer in a Buyer's Market
To find the best buyer for your home is to find the most motivated one. Agents often call GetMoreOffers.com brokers and ask, “Is your seller motivated?” or “What is the motivation of your seller?”.
Some very professional agents would respond by saying very nicely to go fly a kite because that information is not free! This response is rather appropriate because why would a listing agent disclose the true motivation of a seller client to a buyer or buyer's agent?
They would not for several reasons. First, this kind of conversation is a part of negotiating a deal and if done before that, it is pre-negotiating which is free advice to the one you will later be negotiating against. Secondly, anyone fishing for motivation is basically saying your listing is overpriced and my buyer would only entertain an offer if we were assured that your seller would sell for less.
The best way to answer this line of questioning is “Please make an offer.”
Now let's look at this motivation question in reverse. What is the motivation of a buyer? How can a seller explore that question? The best way would be through taking applications. Is there such a thing as a buyer application? There sure is and it's called an offer to purchase a home!
Once an offer does come in, it is then the listing agents' opportunity to ask some qualifying questions of their own. That line of questioning might go like this. Hi Agent Smith, this is Keith Gordon from ADDvantage and I just received your offer on 820 Willow Brook Springs and would like to ask you a few questions.
First, I see your buyer's pre-approval letter and second, the offer seems a bit low. What price do you, as the buyer's agent, believe this home will appraise for? Oh, I see. Well, what would be the high end of the appraisal range? Ok. Well, how much more do you believe your buyer willing to pay?
All these questions explore “buyer motivation”. The answer to which are again pre-negotiation type questions that should not be answered by the buyer's agent.
To find the best buyer for your home, you need someone will be pay at least fair market or appraised value but hopefully a tad more.
The “tad-more” buyer is rare is buyer's market and but common in seller's market.
To find the “tad-more” buyer, a seller needs to take at least three applications (offers) within a 2 month period and explore each buyer's motivation.
The way to ensure this happens is to price your home no more than 4% above what that “tad-more” price would be. This draws maximum showings and ultimately the best buyer.
Professional ADDvantage™ clients get free pricing advice
When sellers list their homes using Professional ADDvantage™, our local agent or broker will come to your home and meet with you. During that meeting, you will have an opportunity to discuss your particular situation as well as review comparable sales in your neighborhood and answer any questions or concerns so that everyone feels comfortable with the process.
Pricing a Home through a Comparable Market Analysis
Also called a CMA, a Comparable Market Analysis is the most common way to price a home because it is based on past sales. The issue with this approach is that many homes are unique and a home sold down the street might have fewer upgrades or possibly a better or worse lot. At times, there are no comparables to even gauge a home's value.
But, CMA analysis is popular and effective in many cases. You can order a CMA through GetMoreOffers.com.
Pricing a home through Comparable Listing Analysis
A Comparable Listing Analysis is the most common pricing approach used by sellers today because of the Internet. Realtor and Zillow both publish homes that are for sale. By comparing the listing price of similar homes, sellers can gauge what might be the best price to list their home.
The drawback to this approach is that listing prices on average are 10-14% above where homes actually sell. So if you align yourself with similarly over-priced homes, ultimately the sold prices will be what buyer's use to make an offer, not the list price.
To find the best buyer, explore and get comfortable with a fair market price for your home and then add a 5-6% to that price. This way, you will be the best priced home in the neighborhood and ultimately find the best buyer.
How to avoid selling your home for less than what it's worth
Invariably what occurs when a home is over-priced is the market moves away from your price and you are always following the market downward giving thousands or even hundreds of thousands away because of either bad advice from a listing agent or misadvised pricing strategy.
The other fact that occurs in this situation is the seller eventually become angry at the situation or in a moment of irrational decisions negotiates with the worst buyer possibly, an unmotivated cash buyer.
The Appraisal Method of Price Evaluation
Similar to a CMA, the appraisal is done by a licensed real estate appraiser. This method is similar to the CMA performed by an agent but uses a scientific approach to adjusting the subject's home value when comparing it to similar homes.
The cost of an Appraisal is near $350-$600.