Pricing A Home

Every deal at some point comes down to the price. How much is it that home worth? How much can I get for my home? How cheap can we get that home?

As a real estate professional pricing is a large part of the job. Here are a few things you should know about pricing;

YOUR HOUSE;

Your home is not an ATM. No buyer cares that you really need to pay off your RV and line of credit with the proceeds of your sale. Think of it in reverse, if your $300,000 home had only $100,000 left on the mortgage and you went to sell it, would you sell it for $100,000? NO! So if your $300,000 home has $260,000 on the mortgage, your RV loan is $60,000 and your line of credit is at $25,000, you cannot sell your home for $345,000.

Just because you put $90,000 worth of renovations into your home doesn't mean you'll get that all back out. If comparable homes to your's are selling for $300,000, your home that was slightly dated when you bought it at $240,000, and then put in $20,000 of windows, $25,000 of stone and stucco, $20,000 of flooring, and $25,000 in kitchen, doesn't magically become $330,000. If the comparable homes are also dated, then you may have a case for the shiny home price.

HOUSE YOU'RE BUYING

If you're looking at homes around $260,000 (considering the agent pricing them, knew the market) it's okay to offer a lower price. However, subtracting the cost of all the changes or upgrades you would do to the home off of the list price is not the right way to do it. The way an agent should be pricing a home to sell is, if that home was "shiny" (the term used when a home has all the reasonable possible updates done to it) and comparable homes were selling for $300,000, that should be the price. But if the home is dated, the agent will be subtracting the cost of updates needed from the asking price. Those figures will often be a little conservative being as the agent is representing the seller. Example; $300,000 shiny price, needs $10,000 for flooring, $15,000 for a kitchen and $15,000 for windows, that home asking price should be $260,000. Notice the numbers I used are exemplary that the seller will always be lower on the price of updates than the buyer who wants to do everything done to the nines for their enjoyment, haha, but it's the truth.

It is customary to offer and to buy under list price. However, be aware that many builders will have set prices and may not move on them. As for resale homes, ask your buyer rep what the average list to sell price ratio is for the market you're buying in and try to stay within that parameter. If you and your agent can't see the value in an asking price the time might right to go outside of that parameter or move on to another home. If you are in a market where multiple offers and sales over list price are the norm, good luck to you, totally different blog.

TO SUM IT UP

The key is "COMPARABLE SALES". Homes prices should be, and usually are set using comparable sale prices. If similar homes are selling at $300,000 (notice how I keep going back to the same number?) then the price of your home should be $300,000. A builder can use cost of input to price but if comparable homes are selling for less, he won't sell many. Your agent should be able to provide you with a list of comparable sales. In the case of very unique homes with no comps, you can throw this whole blog out the window.

TO GET SOMEONE TO PRICE YOUR HOME CLICK THE PICTURE AT THE TOP OF THE PAGE

 

Cam Toews

Cam Toews

Sales Representative
CENTURY 21 Westman.com Ltd.
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