How much will I get for my home? That’s the bottom line for most sellers.
But the list price of a home-how much you ask for it-and the sales price-how much you actually get-may be thousands of dollars apart. The list price is generally the dream price. The sales price is the reality of the marketplace, and sometimes a tremendous disappointment to the seller.
So what is the optimum price you can ask for your home-a price that won’t turn off buyers or shortchange you, the seller? Further, is there a correct strategy for pricing a home and determining whether you’re overpriced or underpriced?
The concept of “the right price” or “a competitive price” is somewhat murky. Data about comparable homes that have recently sold or are currently listed or under contract can help determine the right price. So can information on the average list and sales prices in your area.
According to the National Association of Realtors (NAR), right now the average sales price of a home nationally is generally only 6 percent less than the average list price. Turned around, that means the buyer, on average, pays about 94 percent of the seller’s list price.
Closer to home, this 6 percent average seems to hold up pretty well. Statistics provided by the Elgin Area Association of Realtors, Chicago Association of Realtors, Northwest Suburban Association of Realtors, North Shore Association of Realtors and the Southwest Suburban Board of Realtors reveal that in dozens of suburbs and city neighborhoods, sellers usually receive between 90 and 98 percent of their average list price.
Getting `comps’
Before pricing a home, a real estate agent will check the recent sales prices of similar homes in your suburb or neighborhood. For example, if your home is brick and has four bedrooms and two baths, the broker will check for the sales prices of other 4-bedroom, 2-bath homes in your community.
He or she will also take into account special features that your home may or may not have-such as a woodburning fireplace or an extra-large lot-and add to or subtract from the price of the comparable homes accordingly. Location also comes into play. If your house is on a busy street, you might expect to get less than the owner of a similar house that is situated on a quiet lane.
But the selling process is more than statistics; a lot depends on the seller’s motivations as well, the experts say.
Brokers say there are three ways to go when pricing a home, and all three depend on the seller’s motivation: If the seller doesn’t care when or if he sells, he should feel free to list the home at his dream price, if he can get a broker to go along with it (remember: if it doesn’t sell, the broker won’t get a commission); if the seller wants to sell his home in a reasonable amount of time, he should list the home around 10 percent above the price he’ll accept for the home; if the seller is desperate to sell, he should price his home below comparable homes in the area.
Mike Lamendola, a broker associate with Kahn Realty’s Lincoln Park office, explains: “When there is loads of inventory out there, a good seller should list his house closer to the belt. If they make their property more attractive price-wise than other homes the buyer will look at, they will probably get more money for the home than if they start high and cut and cut and cut (the price).”
Recognizing mistakes
But what if you want to sell your home and aren’t aware you’ve overpriced it?
That’s what happened to one North Shore homeowner. His Evanston townhouse has been on the market for 11 months, much longer than the average marketing time for that suburb.
Thinking he could sell his home quickly, the homeowner bought another house in a different suburb. When the townhouse didn’t sell at the original price of $157,500, the homeowner cut the price to $149,000 after two months. At the end of nine months, the homeowner switched brokers and lowered the price to $139,000. Today, the townhouse is priced at $129,900, and is finally starting to spark some interest among prospective buyers.
“In retrospect, it’s easy to see we priced the townhouse too high,” he says. “But we had no experience in figuring out these things. Pricing (a home) is difficult and complicated and it’s very sensitive to all sorts of things that are unknown to the average homeowner.”
How do you know if you’ve underpriced or overpriced your home?
“Thirty days is usually enough time to know if you’ve underpriced your home,” says Susan Cooney, president of the North Shore Board of Realtors and a broker with Coldwell Banker in Evanston. “If the house sells in short order, usually a couple of days, then you didn’t price the home high enough. Twenty-one days, or three weekends, is enough time to have all the buyers from the active market look at the home, and then you have to add in a few days for the negotiation process.”
Knowing if you’ve overpriced your home is easy: If there is no interest in showing the home within the first 30 days, you probably have a pricing problem. Then you have a choice: You can wait for the right buyer or lower your price.
Cooney had one client who is still waiting for the right buyer. She felt her Evanston home was worth $1.1 million, even though up until a few years ago, no homes had sold for more than $1 million in that suburb.
“All of a sudden, a house on the lake sells for $1.1 million, and then 20 homes come on the market for over a million dollars. But they weren’t worth a million then or today. Prices don’t jump from $500,000 to $900,000 in one year’s time. But people were aggressively deciding their homes were as nice as the one that did sell for $1.1 million,” Cooney says.
But sometimes even a full-price, all-cash offer doesn’t solve every problem. One North Side woman recently received her full listing price with a very clean contract. When the broker asked her what she wanted to do, she told him not to pressure her. “Give me two or three weeks to think it over,” she told him.
The problem? The woman hadn’t yet found a place to move her family. And until that was settled, she wasn’t emotionally prepared to sell her home at any price.
