SMARTMOVES – Make sure the price is right when selling your home
• Ellen James Martin is a real estate writer with Universal Press Syndicate. Write to her at 4900 Main St., Kansas City, MO 64112.
Each year, home prices are increasingly subject to volatile shifts, says Richard M. Betts, an expert on real estate economics. “Market changes are now more dramatic – – both on the upside and downside,” says Betts, who’s followed real estate pricing trends for 40 years.
In many neighborhoods, entry-level housing has risen strongly in recent years, reflecting such factors as burgeoning immigrant populations. But high-end properties are now more prone to “crazy price changes, including unpredictable price drops,” says Betts, co-author of “Essentials of Real Estate Economics,” a classic textbook in the field. Within the last decade, the quality of local schools has become much more influential in the valuation of housing. That means, for instance, that property values in a growing outer-tier suburb served by a sub-par rural high school could take a hit if local authorities were to scrap a plan for a first-rate new school there.
The increasing volatility of home valuations makes it all the more difficult for owners to decide how to mark their properties for sale, especially if they’re selling a highly customized, one-of-a-kind dwelling. Here are several pointers for property owners striving to price their homes accurately before they go up for sale:
Select a listing agent with a genuine knowledge of your area. Reputable real estate agents have what are called “farms,” meaning they have designated areas where they routinely sell homes and stay current on transactions. When searching for listing agents capable of recommending the correct price for your property, stick to those who farm your neighborhood, advises Jeff Beggins, the brokermanager for five Century 21 offices. “Drive the streets of your community and look for For Sale signs. That will tell you who’s actively working the area within a two- mile radius of your home,” Beggins says. Don’t assume that a top producer for your overall region — one who has registered a high volume of sales — will necessarily have a strong enough grasp of your neighborhood. Get at least three opinions on the worth of your home. Much is at stake for prospective home sellers when they’re placing a price tag on their property, Betts says.
A price that is 10 percent to 20 percent over what current purchasers will pay “is usually a huge mistake,” he says. An overpriced home is soon shunned by buyers, which typically leads to a poor outcome for its sellers.In seeking the most accurate price for your property, Betts suggests you consult at least three potential listing agents before selecting the best one to help you make your final pricing decision. If anything, there’s a trend in some fast-moving neighborhoods to price just a notch below the market value of a property to create “a feeding frenzy” among buyers, in hopes they’ll push up the sale price by bidding against each other, Betts notes. Ask your listing agent to show you the data used to price your home. Before making a pricing recommendation, a conscientious listing agent will consider statistics on the results of recent home sales for comparable homes in your neighborhood. “The selection of these ‘comps’ is critical. You don’t want the agent to just pull the top three off the list, because some of these other properties will be too old, too new, too big or too small to compare with your place,” Betts says.
It’s wise for listing agents to examine more comparable sales than they will use to produce their opinion of value about a property, known within the real estate profession as a “Comparative Market Evaluation” (CMA). A good listing agent should be able to justify the selection of the comps used to support his pricing recommendation for your property and tell you how she adjusted the numbers to reach her price suggestion, Betts says. Become aware of the current pricing realities in your market. Sellers tend to be myopic in their belief that their properties are superior to other nearby homes and therefore deserve a higher price, says Beggins, the Century 21 broker.
He suggests that sellers visit rival properties during public open houses, or ask their agents to arrange showings if possible. Maybe you’ll discover that a rival property has been marked down to what your agent considers a sacrificial price because its owners want to stimulate a quick sale, perhaps due to a divorce or a major financial reversal.
In such a case, Beggins says you have two options. Either match the low-priced property, or delay your listing until it’s sold. “The lower priced-house is an absolute competitive threat, and you must deal with it,” he says.