Although many local housing markets are experiencing increased sales prices, it is still very important to be careful in listing your home at the right price. I have always adhered to the notion that a listing has the strongest potential to attract qualified home buyers the first two weeks on the market (many agents say it is the first 30 days, but I think the first two weeks are the most crucial). With a great listing agent, a strong marketing plan, and quality photos of your home, the right list price will provide the opportunity to attract many buyers, possibly leading to multiple offers.
Here are some of the issues sellers can face if their home is not priced right from the start:
1. Lack of interest. It used to be that buyers would come and see properties even if they were not priced well. In the last few years, it seems like that is no longer the case. Many buyers now prefer to to wait on price reductions, with the philosophy that lengthy market time means sellers are breaking down their barriers and might be willing to sell for UNDER market value, just to finally get rid of their homes. Those homes that are priced well garner more interest from both agents and buyers, and have a higher chance of selling. In fact, in many areas, such as here in North San Diego, homes that are priced well end up getting multiple offers and even selling above list price.
2. Extended market time. This really goes hand in hand with number one, above. If you do not have your home priced right you will not generate interest amongst qualified buyers; no interest = longer market times. Lots of buyers tend to want to wait until prices come down, rather than trying to negotiate with sellers whom they feel are unreasonable in the expectations. Price reductions down the road do not seem to stimulate interest like a new listing hitting the market.
3. Appraisal issues. We are seeing many more appraisal issues now, mostly because the banks have been so stubborn with lending. They want to prevent the free-for-all lending environment that caused the housing crash. In my opinion, they are really being too strict in lots of cases. Where there are strong sold comparables, and home prices can justifiably be increased (due to location, condition and upgrades), it is important for the lenders to understand that such properties should sell for more. But of course, there are limits.
4. Distressed property comparisons. Many sold comparables might contain a few or lots of distressed sales. Some agents still believe that appraisers appraise properties with two different sets of criteria: distressed and non-distressed. That is no longer the case, in my opinion. Just because a home is distressed most lenders still expect the home to sell according to comparable market prices. There IS an advantage to the waiting periods for non-distressed properties, but all things being equal your home should not sell for $100,000 more simply because it is not a short sale or bank-owned property. Of course, many other factors need to be considered in appraisals, including condition, location and upgrades.
So, how do you come up with the right price for your property? The first thing to do is to hire an experienced area agent. He or she can provide you with an extensive comparable market analysis, and then you can consider any upgrades, superior location, views, etc. It is alright to add on a reasonable amount for any of these “extras,” so discuss with your agent as to what is considered reasonable. If you have a home that is difficult to compare, you may want to consider paying for an appraisal before listing. Even if your market has become a sellers’ market, as have many attached homes in San Diego cities, you still need to be reasonable in pricing your listing. In retrospect, once you have sold your home, I think you will be happy that you did everything right at the beginning.