In working with some new home buyers the past month, I’ve really enjoyed showing them all the ins and outs of buying that elusive first home. One of the things we talked about in the beginning was the asking price. A lot of buyers are of the misunderstanding that the asking price is like looking at the cost of an item available at different stores. As an example, a box of Corn Flakes may be priced different at Dierbergs or Schnucks, but it’s still a box of Corn Flakes. The asking price for homes is a little different. Let’s use the wine aisle at the grocery store. There are lots of wines and there are lots of houses. Let’s say you want to buy a sauvignon blanc. There are going to be many different available, and the price points will be all over the place. That’s much closer to the truth in asking price for homes in St. Louis.
There are all sorts of factors that go into determining an asking price. We will hit that in a different post, but I did want to go over the way to approach the asking price from the buyer perspective.
When you go to a house, there are a couple of ways you can compare that house to ones you’ve seen currently for sale. Here are just a few of the questions to ask yourself.
- Does this house have excellent craftsmanship? If it doesn’t, then it shouldn’t get the premium price on the block. But, it’s entirely possible that there are other factors that justified the high asking price.
- Is the house in a well desired location relative to other homes? So, if you are in a neighborhood and one house is closer to a park or greenspace than another, it’s possible the house will sell for a premium. Or, at least, the asking price will be higher.
- What is the size and features of the lot on which the house sits? If the lot is sloped towards the house, small, or the house is on a cliff relative to the other houses in the neighborhood, it isn’t going to bring about as high of an asking price as others.
Zillow And The Estimate
With the rise of Zillow and other sites that provide their black box estimates, people have begun to think that the asking price is in some way relative to that estimate. This is a terribly bad strategy for pricing your home. I can see where there the pricing disconnect is though. Sellers are in a completely different mindset than buyers. Most sellers have never been to an open house in their neighborhood, and even if they have, they haven’t been to the 20 to 30 houses the buyer or real estate agent has been in when comparing homes. As yet, we don’t really have the technology for buyers to sit on their couch and buy a home. They have to be out there in the field.
Listing Agents Influence Price
The agent for the seller also influences pricing decisions. Pricing a home for sale can be difficult and there are often other factors at play when deciding to list a home for a particular asking price. Sometimes, an area of St. Louis gets really hot, and listing agent may know that and ask more. There really isn’t a way to quantify that feeling that you can get a certain price for a home.
What Is A Buyer To Do?
At the end of the day, the seller can ask for whatever price they want. The buyer determines the selling price, however. And this is my point. When we look at asking prices in a particular area, those are merely strong suggestions as to what a seller would take to sell the home. Some sellers are going to get more than what they asked for, and some sellers are going to get less. The key is working with a buyer’s agent in St. Louis who has the experience and knowledge to help buyers write a sensible offer relative to the homes in the area. If you have that in a buyer’s agent, you are going to be in great shape. If you don’t, expect to overpay.