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The value of a home is an elusive quantity. As the recent upswing in the market testifies, homes are a commodity that are subject to the laws of supply and demand. Fortunately for the industry, homes are currently very much in demand. But as prices escalate, it becomes more critical than ever that you price your sellers' home as accurately as possible, without going over the top.
Your seller may never realize what experience and talent it takes to price a home correctly, one that will sell quickly at the highest price possible. All your seller knows is that your job is to get the highest price that you can.
But by showing your seller that you are not reliant solely on comparables to arrive at a listing price, you will demonstrate your professionalism more easily. You can help your seller understand one of the fine points of residential real estate - that the market isn't determined solely by comparables. It is determined by the combination of the seller's unique home and situation and the buyer's situation. In other words, the market is created house by house.
Naturally your seller wants you to get the same price for their home that the out-of-town buyer paid top dollar for down the street. By the same token, they don't you to sell their home for the low amount the bereaved family got for their next door neighbor's home. Yet both homes will influence the comparables (CMA.)
As you well know, the CMA doesn't tell the story. It never mentions the reasons a home is priced the way it is or why a buyer pays a certain price. It also never mentions the details of condition, overall appearance and other factors that drive up or down the price of the home.
The following is a brief checklist that will help you remember all the variables that can influence the pricing of a home.
1.Seller's Urgency Level. One of the first things you must do is find out your seller's objectives. You will, of course, keep private any information they wish, but you do need to know their urgency level. How quickly do they want to sell the home?
There are numerous reasons why a family would sell a home - birth of a baby, transfer, death, divorce, empty nest, move-up, lifestyle change, and more. Each reason has a unique urgency level that will influence how you price and market the home. Obviously an empty nester will not be in as much of a hurry as someone who has already purchased another home and will be making two house payments until the first home is sold.
2.Comparables. You can read the CMA as well as any agent, but are you willing to take the time to look at each home with your own eyes? By visiting the homes that are for sale or have recently sold in your seller's immediate area, you can pinpoint major and minor differences in the homes that can not only assist you with pricing the home, but can be used as bargaining chips when negotiating with other agents. Gather the feature sheets and make notes about each one, and keep them with your seller's file. Keep abreast with any that go to contract and close and alert your seller when they do.
The more knowledgeable you appear, the stronger you will be in your listing presentations and in your negotiations. Try to avoid giving the seller a price range for their home until you have made other determinations. The CMA will give the high, low and median listings and solds, but your seller will need to supply you with more information before you can arrive at the correct listing price.
3.Home's Condition/Seller's Willingness to Make Improvements. Armed with the comparables and your own first hand observations, you can convey to your seller what the condition of competition is. Has the home down the street been completely remodeled? A new roof next door? What preparations to sell have been made? What is the drive-up appeal of the competition? What are buyers wanting in the neighborhood?
One of the top agents in the nation and #1 producer for Coldwell Banker, Eleanor Mowery Sheets, insists that her sellers get their homes inspected before they put the home on the market. She says she is preparing her sellers for closing, not for selling their homes. "My job is not just to market the home - it is to make certain the home closes. An inspection puts the seller in a position of strength - they can fix what the inspection reveals or price the home accordingly."
How much is your seller willing to do? Will there be fresh paint, flowers planted in the front, clutter cleaned out, floors buffed, carpets cleaned? Each of those improvements assure that a buyer will offer closer to the asking price. Any repairs that aren't made will be discounted by the buyer, and often severely.
4. Seller's Break-even or Profit Threshold. Before you go any further, you need to determine for the seller if, in fact, they can afford to sell. Find out what they owe on their current mortgage. Subtract that figure from the average comparable home. Then subtract the closing costs, depending on the market and your agent split, about 8% to 10%. Figure in repairs, a home warranty, allowance, and any other costs the seller may wish to include and subtract that figure. What is left is what your seller will clear from the sale of the home.
If the seller is unhappy with their net profit from the sale, you can help them with another solution - leasing the home, taking longer to market the home, waiting until the market is more favorable, or selling the home for less money.
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