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Pricing Your Home to Sell in Today's Competitive Market - 2007-10-27 |
Selling your home in today's market is harder than it was just a few years ago. Last week we explored a variety of ways to give your home the edge from a marketing standpoint, but we didn't talk much about price. And there was a specific reason I wanted to postpone that discussion.
I am convinced that price is too often used as a crutch.
If we can agree that the three primary factors affecting your sale are condition, marketing and price, the one that is most easily adjusted is certainly price.
That's because adjusting your home's condition is painful and expensive. If you come to the conclusion that your master bath needs a facelift, it's probably going to end up costing you several thousand dollars and weeks of sheetrock dust.
Likewise, if your marketing strategy needs adjustment, it can require thought, action, and money, all of which are painful when expended.
But lowering your asking price is as simple as a stroke of the pen.
It requires no thought, other than "it seems logical" that a lower price will attract more buyers. It expends no action beyond adding a rider to your "for sale" sign that says "new price," whatever that means.
And yes, it does, eventually, cost money, but that is later, when there should be a lot of money to spread around anyway, so it seems like maybe the best course to take.
And because it is so easy to lower the price, I believe it is too often used as a crutch to limp beyond the more difficult matters preventing a sale. Specifically I mean your home's condition and your marketing plan.
So, if you are truly convinced that your home's condition is excellent, especially when compared to your competition, and you are firmly convinced that your marketing is getting the message to the right prospects, only then (in my perfect world) are you allowed to address the issue of price. Because failure to do so may cost you literally thousands of dollars as you try to take the easy road to the closing table.
Now, if you have reached that point, your home is ready to move into and you and your agent are ready to take on the world, how do you price your home to sell?
In previous years, I have advised sellers to obtain a "competitive market analysis" from each of several agents they interview, hoping to gain enough information to accurately gauge the market. And in the steadily climbing market of recent years, that strategy often sufficed.
But I am afraid you may need a bigger gun today.
The "big gun" of the world of real estate valuation is a licensed appraiser, and more specifically a SRA appraisal. The SRA stands for Senior Residential Appraiser, and it is a professional designation given to only the most experienced appraisers.
The SRA designation is held by fewer than one percent of all appraisers nationwide, and it indicates an experience level of at least two thousand hours of residential appraising. In contrast, a licensed appraiser in Georgia can begin an apprenticeship and start making estimates of value with only a minimum of experience.
In my opinion, today's market is one of the most challenging ever to face the real estate community. And that's because it is so difficult to accurately reflect the changing value environment we are facing.
Here's the fact: the average home in metro Atlanta increased in value by 3.84 percent during the recent one year period ending June 30th of this year. That's according to the most reliable measure we have of home price movement, the Home Price Index from OFHEO.gov.
Here's the reality: that average movement may have had absolutely nothing to do with your home's value, depending on where you live and what homes near you have sold in the past twelve months. All real estate is local, right down to the house next door.
Contrary to what you might believe, your home's value does not advance (or decline) in a straight line as time goes by. Instead, that value likely moves up and down all year long. And if you had your home appraised by an experienced appraiser every day for a year, I am willing to bet that the line would be completely crooked, reflecting sales that occurred throughout the time period covered.
We would certainly hope that the line for your home would trend in an upward direction, but that is not the case for many neighborhoods in Atlanta, where the combination of over-exhuberant buyers have coupled with the crime of foreclosure fraud to actively drive down resale prices.
It is important to remember that the home buyer's greatest fear is "paying too much" for your home. And in my opinion, the most powerful way to combat that concern is to hand the prospective buyer a full and complete SRA appraisal showing that your asking price and your home's true value are one and the same.
I honestly don't envy the appraisers today as they try to use all the research available to them before they divine a number from the fog. And believe me, if I ordered an appraisal today, I would use all my persuasive powers to try to convince the poor appraiser that I was right in my own estimate of value.
But the bottom line remains that today's buyer is most likely to be swayed by a home priced at appraised value by an experienced SRA appraiser. Not a penny more, not a penny less.
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BUYING FORECLOSURES IN GEORGIA
NEW for 2008: Bank-Owned Home Bonanza
This seminar has been updated and revised for 2008 to reflect the dramatic changes in the Georgia foreclosure marketplace. We are literally facing a flood of foreclosure properties, and there is profit to be made in each and every one of these homes.
Whether you want to build a portfolio of homes for your retirement or you simply want to find a better home for yourself and your family, this program is for YOU.
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• Saturday, Oct. 11th, 2:00 P.M. until 5:00 P.M. - Renaissance Waverly Hotel in the Cobb Galleria
This COMPLETELY NEW SEMINAR examines the roots of today's foreclosure meltdown and explains how you can take advantage of this opportunity in your spare time.
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The Real Estate Investor's Institute will be held at Emory University on
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Detailed information is
available under "Seminars."
This course is approved by the Georgia Real Estate Commission for 12
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