As a Realtor who has served the Scottsdale area for 19 years, I can tell you that when meeting with sellers to discuss the sale of their home, a seller’s number one question is always: How much should we ask for our home? A lot of factors enter into the pricing strategy and decision. Here are a few of the important ones:
1. Analyze sales prices of comparable properties that have recently sold
The most important data to consider is the recent sales prices of similar properties in your neighborhood or surrounding area. This is the information that buyers are studying when considering making an offer on a home. It is also the data that an appraiser is going to consider when putting together an appraisal report on a property.
It’s important to note not only the sales prices of recently sold properties, but also the differences between those comparable properties and your own home. Is your home on a busier road and how does that affect the value? What about your home’s larger lot or better upgrades?
2. Analyze the competing properties
Is the current inventory high or low? If there is excessive inventory on the market, you may want to price your home attractively compared to the other listings to catch the attention of buyers. Conversely, if inventory levels are low, you can probably ask a little more for your home than you would be able to do if the market was flooded with similar available properties.
Are the list prices of competing properties well priced, or aggressively high? If you think the competing properties are priced unrealistically high, it may make sense to price your home under those properties to make your home more attractive.
3. Consider your sense of timing
Do you need to move your home quickly? If you want a quick sale, the recommended pricing strategy may be to stick as close to the fair market value as possible when listing your home.
If you are in no rush and have time to sell, your strategy might be to “test the market” for awhile, and choose a higher list price. Be aware that too many days on market may negatively impact offers that you receive later down the road.
4. Consider the appraisal
If you think that the most likely buyer of your home will be financing their purchase, then you need to consider whether the price you are asking for your home is realistic in the eyes of an appraiser. If you’ve marketed your home and received an offer for significantly more than what other similar homes in your neighborhood have recently sold for, you might run into appraisal problems that could put the brakes on your sale.
5. Be aware of current market conditions and trends
Make sure you select a Realtor who understands current market conditions and trends. The real estate market is dynamic. Remember that looking at recently sold prices of comparable homes is going to tell you what prices have done in the last 6 months, not what they are doing right now.
If prices are rising, then you can probably push the pricing of your home above the recent market comparables. How much you can push is a fine balance between finding the premium that the market would be willing to pay for your home and not shooting yourself in the foot when it comes time for the buyer’s appraisal.
On the flip side, if the market is falling, then you may need to get under the market – that is, price your home under what homes have recently sold for. If you don’t make that difficult decision today, you may spend the next 6 months chasing the market downwards and watching as the value of your home falls in tandem.
6. Understand the different ways to evaluate price
Price per square foot is a way to evaluate prices when homes in a neighborhood are similar. But there still needs to be some way of accounting for superior and inferior locations, finishes and views.
In custom home neighborhoods, price per square foot isn’t always relevant. Looking at price bands of similar homes and making adjustments for different features, upgrades, conditions, location and view requires a Realtor who is savvy, experienced, and familiar with the currently available and recently sold homes.
7. Consider list price to sales price ratios
In some markets, it may be “the norm” for homes to receive low offers and to sell 10 – 15% below list price. As a result, the strategy in those markets might be to build in some negotiating room.
In Scottsdale today, homes sell on average within 94-97% of list price. Typically, if a home is considerably overpriced, it won’t even see an offer, not even a low one. During my 19 years of selling homes in Scottsdale, I have learned that pricing a home close to it’s market value is the best strategy for maximizing a property’s selling price.
A lot of variables should be considered when putting together a pricing strategy for selling your home. Make sure you consult with an experienced real estate agent who can help you navigate and evaluate these variables to make sure you price your home effectively to maximize it’s value.