Pricing your home for sale can be difficult. I was asked to do a broker price opinion the other day and I thought it might be beneficial to go through the steps. Although sometimes I think some agents make pricing up as they go, I tend to follow a pattern. Let’s walk through the steps of the pattern and see how we are comparing sold properties to get a listing price.
Where is the property located? Is it on a farm? If it is located on a farm, those prices are going to be influenced more by the cost of the land all things being equal. If the house is in the suburbs or dense urban setting the house price will be better determined by those houses immediately around them.
What makes up the neighborhood? Are there natural streets that border the area? There are a few ways to tell. One, look for main streets built at the same time as the neighborhood. We do this because a highway system could have split a neighborhood in two, and now there may be different values depending on the side of the highway. Also, main streets tend to become barriers due to traffic.
Subdivision or no?
If a house is built in a subdivision in the 70’s or later, every house will likely have at least one or more twins to compare with. This makes things a bit easier provided you are familiar with the housing in the area.
When you compare properties to get a listing price, you definitely want to take a look at lot size. If two exact houses are built, and one house has a larger lot, all things being equal, the house with the larger lot will be more desirable than the house with the smaller lot.
The home I was looking at yesterday was frame construction. The house sat in a subdivision of brick homes. In St. Louis, there is usually a difference in price between brick and frame construction. When you have a situation like this, you need to be comparing brick homes to brick homes and vice versa.
Are the bathrooms updated? What about the kitchen? Has the flooring been recently done? What is the construction quality? These things really matter when comparing two houses to get a listing price. This is one of the areas where a physical inspection is very important. Real Estate Agents can get away with using only the best pictures shot in a perfect way that doesn’t show bad construction. Therefore, whenever possible, it is important to go and physically see comparable properties currently listed.
What Is The Square Footage?
Sellers and real estate agents have been playing with this number for a long time. We used to have a standard known as square feet. We moved to above ground square feet and below ground square feet. The latest number is total living area, which is the combined square footage of the below ground and above ground square feet. I take these areas into consideration, but the original above ground square footage has more weight than any other number.
Proximity To Annoyances
In any neighborhood, there are going to be some houses that are just better than another house because of it’s location. I call this proximity to annoyances, but I’m sure there are other words for it. Here is an example. One home in the subdivision is in the middle of the subdivision. There is hardly any traffic that goes by. In the same subdivision, the back row of houses has a very busy street behind it. The house in the middle of the subdivision will be sold for a higher price than the one that is on the main street. This is also true for storm sewers, convenience stores, etc. The houses closest to the annoyance will be sold at a lower price.
Date Of Comparable Home Sold
When was the last house sold that is similar in comparison to the one you are getting ready to list for sale. I usually give significantly more weight to a home that has sold within the last 3 months over all others. Ideally, you have a bunch of houses that have sold in the area so you can average the price a little bit, but sometimes only one or two have sold. There are times in very stable subdivisions that a home hasn’t sold in the past year. In this case we try to look at how the overall market has changed and price accordingly.
The Listing Price Is A Combination Of Factors
When comparing sold properties to get a listing price, it’s important to note that each house is going to have plusses and minuses. If one house has a new kitchen but it’s not great construction, that price is going to be lower than a house with a slightly older kitchen where everything looks perfect. We are working with what each house has versus the houses that have sold around it.
Where Do Bad Listing Prices Come From?
In my time in real estate in St. Louis, I’ve come up with a few theories on why houses get listed incorrectly for sale.
Listing Agent Pressure Listing agents survive by listing properties. If they don’t get listings, they can’t be listing agents. Some homeowners have prices in their minds that are completely silly. In the case of a malleable listing agent, the seller can exert so much pressure on the agent that they will list the house way higher than what it will sell for.
Agent doesn’t care Some real estate agents are looking to do something else in the near future. They don’t care what the listing price is. They don’t have any interest in doing the legwork necessary to list the property so they put some number on it and look for price changes in the future.
Bad Comparables A house 6 miles away that sold 4 years ago isn’t a comp you should be using for a home for sale. It’s just not. If you are going back that far to find a property, you have a better chance at arriving at a listing price with a house that has sold recently.
The Deerwood Advantage
When you use Deerwood Realty, you have an advantage. We’ve been in the marketplace for a long time, and we’re aware of all the nuances involved in comparing sold properties to get a listing price. Getting the listing price right is crucial. Price your home too low, and you leave money on the table. Price your home too high, and the property sits for months, which are costs that are never going to be made up when you move to your new home.