How easy is it to get home pricing done accurately? Pricing a home may look as simple as checking out your Zestimate but a lot of real time and historical data goes into the tricky computation of determining the best price to list. Some of the variables of home pricing are more easily perceived, such as how much the condo downstairs sold for. Some of the variables are much harder to decipher for a seller, such as seasonal adjustment for demand, current absorption rate, and pricing return on investment (ROI) for improvements just to name a few.
There is a reason why the National Association of Realtors (NAR) found that the average For Sale By Owner (FSBO), or seller not using an agent, sells for an average of 6% lower than a Realtor would have for the same property. While some people find that difference negligible in comparison with the sales price, it is almost always enough to cover agent commissions, not to mention it takes all of the stress away of handling the process on your own. Home pricing is just one thing agents can do for you but let’s dig into how we do it and why it is so crucial.
Value is determined by a potential buyer, only estimated by a seller and or their representation. 5 potential buyers will likely see a home with 5 different sets of emotionally driven, personally biased opinions that will see them attach their own unique value to the property. Part of our job as agents is to gauge the current market not only based on recent comparables but also what the future may hold with objective facts. Inquiry to list time can be days, years, and anywhere in between, depending on a client’s needs which leaves varying levels of opportunity for market conditions to shift.
We most often compute value by performing a Comparative Market Analysis (CMA) which can be a general ballpark, down to a hyper specific current market valuation of your house in relation to other comparable sales. This is most often performed before a contract is even discussed and is a crucial first step to setting seller expectations. Eventual pricing is often adjusted off of this number for various factors but getting a baseline of on-market and off-market (less publicly facing) listings will hone in on a more accurate true value.
True value is a full time job to track and adjust; yet another reason why shifting the stress of juggling this process to a professional seems appealing to so many. Roughly 92% of home sellers use agents, while the percentage of FSBOs has steadily declined since the Great Recession. Unless you feel confident in being able to juggle things like supply versus demand computation, scouring public records, price comparing various updates across multiple homes it is probably better off a job left to someone who is trained in determining home valuation.
Contingencies can be often overlooked and frequently mismanaged. A seller most often wants to see their house sell for the highest price possible. The problem with that singular outlook is that you miss variables such as timing of close, buyer contingencies, and offer price versus appraisal valuation. All of these can prove to be equally if not more important in the process and without giving extended thought to them, you might find yourself in an offer you don’t like as much the next morning.
Contingencies such as a buyer selling their home is neither typically desirable for a seller nor are an array of buyer friendly protections. Being able to negotiate out those contingencies can drastically increase the chances that your home clears the closing table, no matter the price of the offer you accepted. While price will always be a top consideration, many sellers don’t consider that someone could offer you too much for your home. This is not applicable in all cash transactions but with financing involved, appraisals are required by banks to determine their own “true” value of the home.
If an appraisal comes back lower than the offer price, there is a good chance that the buyer will consider a renegotiation or withdrawal of their offer all together. Massachusetts purchase contracts no longer directly address appraisal value so unless it is written overtly, you may run into financing issues due to the appraisal that could sink your deal.
A delicate dance that is often intertwined with both of the above points, adjusting pricing expectations prior to listing is paramount to meeting all seller needs, not just price. Sometimes a seller’s position allows for them to prioritize the highest price but what if they need the funds from the property they are selling to buy a new one? You can utilize language such as “seller to find suitable housing” but savvy buyers and their agents sniff that out and often use that as leverage to drive down price or simply pass on the house all together. Perhaps there is fear that a seller’s home, originally built in 1820, will leave room for an inspector to pick their home apart and scare off a buyer. This is a great pain point to recognize early and consider lowering your initial asking price or giving favor to a lower priced offer, in a multiple offer situation, that is willing to waive an inspection.
Something getting more common from skilled buyers/buyer’s agents is a partial waiver of appraisal contingency. This partial waiver is something less common than a dropped home inspection and may be a nice meeting point of liability between buyers and sellers.
While it is important to maximize your return, an offer price is no good if it never gets to the closing table. Ensuring you feel comfortable with your anticipated return while understanding both your own needs fully and the contingencies you might face will be the difference between selling and languishing on the market. Homes that don’t take these, and other key factors into consideration when listing their home are setting themselves up for failure or at minimum, an underwhelming result.
Sometimes value is worth the price of admission and with statistics such as well studied sale price differential determined by NAR when using an agent or going solo, why would you consider anything else? Best to leave it to the professionals to value your home most accurately and reap the rewards, as well as the dollars, of seeing your home sell on your terms without the additional headaches.
Ready to get your home valued? Contact us today and one of our licensed Realtors® can help you get started!