2 Things You Need to Know to Properly Price Your Home

In today’s housing market, home prices are increasing at a slower pace (3.7%) than they have over the last eight years (6-7%). However, they are still are above historical norms. Low supply of listed homes and high demand from buyers has pushed prices to rise rapidly.

In the mind of the homeowner, annual home price appreciation over 6% has become the new normal. This becomes a challenge when a homeowner looks to refinance or sell their home, as the expectation of what the homeowner believes the home should be worth does not always line up with the bank’s appraisal.

Every month, the Home Price Perception Index (HPPI) measures the disparity between what a homeowner seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

Over the last five months, the gap between the homeowner’s opinion and the bank’s appraisal has widened to -0.78%. This is important for homeowners to note, as even a 0.78% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home).

The chart below illustrates the changes in home price estimates over the last 12 months.

2 Things You Need to Know to Properly Price Your Home | MyKCM

While the appraisal gap widens, another trend is also becoming more common.

According to realtor.com“the share of homes which had their prices cut increased by 2% compared to last year”. Thirty-seven out of the 50 largest US housing markets saw an increase in overall price reductions.

In today’s market, you need an expert agent who can help price your house right from the start. Homeowners who make the mistake of overpricing their homes will eventually have to drop the price. This leaves buyers wondering if the price drop was caused by something wrong with the house. In reality, nothing is wrong- the price was just too high!

Bottom Line

If you are planning on selling your house in today’s market, let’s get together to set your listing price properly from the start!

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Selling Your Home? Thinking of “Trying” The Market?

Price-It-Right-STM- Keeping Current Matter.jpgWhich strategy works best – pricing BELOW the market, pricing AT the market, or pricing ABOVE the market just to see if you can get your price?

Well, that all depends. On YOUR market. If you’d like to talk strategy and find out about YOUR SPECIFIC market, contact The Belt Team. In the meantime, here’s some great info from Keeping Current Matters. We happen to think in many cases it makes a LOT of sense. (Note: Not ALL markets are the same. There are NO absolutes. Call us at 703-242-3975 to find out about YOURS.)


In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

John Knight, recipient of the University Distinguished Faculty Award from theEberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered their price. His article, Listing Price, Time on Market and Ultimate Selling Price, published in Real Estate Economics revealed:

“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”

Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think,“Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.”Pricing it right from the start eliminates these challenges.

Don’t build “negotiation room” into the price.

Many sellers say that they want to price their home high in order to have“negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.

Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!

One great way to see this is with the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.

Selling Your Home? Make Sure the Price Is Right! | Simplifying The Market

A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the“right” to purchase your house.

Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

The Price is Right

Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Let’s get together to discuss what is happening in the housing market and how it applies to your home.


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For more questions or for a specific update on YOUR neighborhood – call Terry Belt & The Belt Team at (703) 242-3975 for a FREE Buyer or Seller Consultation. Don’t you deserve the BEST Realtor in Northern Virginia?!

Don’t Be Like Timothy Geithner! (Mistakes Sellers Make)

Once upon a time . . . a long, long time ago . . . I went to college with a guy named John Leibowitz. He played on the soccer team at The College of William & Mary with a friend of mine. And they roomed together after college.

Anyway . . . that’s just a roundabout introduction to this hilarious clip from The Daily Show with Jon Stewart (aka John Leibowitz). Take a look at this clip and then if you are thinking of selling your home, keep reading below. (By the way – you probably already know, but Timothy Geithner is the Secretary of the United States Treasury.) Just click on the button that says “Home Crisis Investigation”.

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Home Crisis Investigation
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While this clip is pretty funny (at least WE think so!), it also reminded us of how some Home Sellers in Northern Virginia approach the market.

Did you think the auction scene in the clip was a little unrealistic? Well, we see that type of approach more often than you think. Sellers have in their mind a certain number they want to sell for – sometimes it’s what they “need”, sometimes it’s based on what they “think” their home is worth, sometimes its based on what they “owe”, sometimes its based on what they “paid” for it or what their neighbor’s home sold for last year. But it’s not based on TODAY’S market and what real buyers in the market are willing & able to pay.

So the Seller puts his home on the market – to “try” out the unrealistic price – even though their Realtor has counseled them against this strategy. “Let’s just try it for a month or so” is what the Seller might say. The home is shown, a number of buyers come through, but no one makes an offer. Thirty days go by quickly. Then sixty.

Time for a price reduction – right? Nope, the Seller wants to “wait for the right person to come through who appreciates what we’ve done with the house.” So they keep the price the same.

“1.6 Million! 1.6 Million! 1.6 Million! 1.6 Million! 1.6 Million! 1.6 Million! 1.6 Million! 1.6 Million! Please buy the house!”

See the connection?

So – no big deal, right? The Seller will eventually sell his home. But at what cost? Just a 60 day delay? Nope. Statistics show that the longer a home is on the market, the lower the price it eventually sells for. So it doesn’t just cost you time, it costs you money. You need to get it right the first time!

And then there was the whole “blue bathroom issue” in the video.

This is another area where Sellers make HUGE mistakes. Buyers in today’s market expect a home to be pristine and move-in ready. In their mind, that means moving into a home they can live in NOW – without doing any work. And just because blue tile might have been your choice, doesn’t mean it will be theirs – even if it cost you a bazillion dollars to install! But this is a topic for another day. Let’s get back to the whole issue of pricing.

Here some of the DANGERS OF OVERPRICING YOUR HOME:

  

(1) You will lose the excitement that a new listing generates: Real estate agents are working with buyers who have seen what is currently on the market and are waiting for something new to be listed. Therefore, the most activity will take place in the first 30 days of a listing. Your home will probably receive its highest and best offer during this time. After that initial period, the only people to look at your home will be new buyers in the marketplace.

(2) You will lose the most qualified prospects: Buyers won’t be able to even “make an offer” because they probably won’t see your property. They will view the properties that are priced within their purchase power range, knowing that they cannot afford anything above their range.

(3) Overpricing helps sell other, more competitively priced properties first: Your home may be used to demonstrate the good value of other properties. Your objective should be to enter the market in a position that will attract buyers to your home – not to sell other homes.

(4) Your home may become stale on the market: Prospects may wonder why it has been on the market so long or if something is wrong with the property, even after you lower the price. You may even have to settle for less than market value. A house takes on a reputation surprisingly fast, so don’t wear out your welcome on the market. Statistics also show that the longer a home is on the market, the lower the price it eventually sells for.

(5) You lose a strong negotiating position when your house is on the market for a long time, both financially and mentally: Prospects will not “rush” to make an offer on an overpriced property, and you may feel compelled to accept less when they finally do.

(6) If you do get an offer, the contract may fall through because of appraisal problems: The lender must justify the price to the secondary market and as our market has changed we have seen lenders become more conservative in this area.

This is one of the most important reasons to make sure you select the right Realtor. Don’t let an agent “buy your listing” by throwing out the highest suggested list price. While this may sound tempting, it can be very costly to you! A professional and experienced Realtor will provide an honest recommendation and will have your best interests at heart!

If you are thinking about selling your home, don’t be like Timothy Geithner! Contact The Belt Team at (703) 242-3975.