Pricing is not about what the seller needs or wants for the property, nor is it about one’s intuition or the impression the home gives. Pricing is about hard-core research data obtained from comparable sold properties (real value), and then strategically assessing the competition to achieve the seller’s goals. There is no responsibility more important than this. An honest Realtor ® will still occasionally be corrected by the marketplace (that keeps us humble), but no Realtor ® can pull-one-over on the marketplace. The market is the most powerful force; no one controls it.
How We Price a Property:
Walk the property and see the home in person. It takes ‘boots on the ground’ reconnaissance to make smart decisions. One cannot even begin the research until this has been accomplished.
Know the comparable areas. Two towns located in the same county will have considerable differences in value because of numerous tangible and intangible differences. This goes for neighborhoods as well.
Compare the property with genuine comparable properties. Two statistically identical homes will be dramatically different in price because of location alone, and there are always other considerations as well.
Compare sales which occurred in the same market conditions. Appraisers prefer ‘comps’ to be no older than 3 months, almost never more than 6 months. It does little good to see properties which sold last year unless you have a depth of knowledge to properly extrapolate value.
Compare with actual sales in the free market. Distressed sales which are the result of foreclosure, or closed sales within a family, do not reflect the actual market price. They distort the value and need to be eliminated from consideration.
Many of the problems we now suffer from (the sub-prime mortgage mess, rabid speculation and non-existent standards) are tied to the fact that in-person appraisals were not performed. Instead, lenders relied on automated valuations to support their loan programs.
When a homeowner plans on selling their property, the first thing they probably would do is to call an interior or exterior remodeling company to fix any existing issues. Once the basic improvement work is done, they turn to the listing agents. We have a saying that the listing agent begins as a hero in the eyes of the seller (great expectations!), but it goes downhill from there, sometimes way down because the end result is less than the dream. On the other hand, a buyer’s agent begins at a disadvantage without trust from the buyers, but in the end, achieves a dream for the buyers, and so ends the transaction as a hero.
While it is good to interview more than one Realtor ®, sometimes the competition to win the client can cause the promise of price to be overstated. Learn more about establishing value and ask your Realtor ® to show you the data to support their claim.