They’re a couple of seniors living within the greenery of a well-embellished community of retirement homes. What’s more, their property is in Better Homes and Gardens condition, with a superbly organized shop.
But the husband–a retired engineer and inventor in his mid-80s–has fallen into ill-health. And the couple is having enough trouble maintaining their trophy home that they know a move is just around the corner.
Their quandary? Should they believe a real estate agent who thinks their prize home will fetch $50,000 less than they anticipated?
Many home sellers hold the cynical view that a real estate agent will deliberately put a low price tag on a property just to nab a quick and easy sale.
But only 1 to 2 percent of agents seek a low asking price to expedite a sale and save themselves time and money, according to Richard Dillingham, former president of the Residential Sales Council, a Chicago-based organization of top-selling real estate agents.
The fact of the matter is that more agents–perhaps 10 percent, in Dillingham’s opinion–will suggest too high a price, in hopes of flattering the seller into signing a listing agreement with them.
“There’s tons of competition for listing agreements,” notes Terri Murphy, a RE/MAX agent and real estate author.
True, the longer the house stays on the market, the greater the expense to the agent. Most costs for advertising, marketing brochures and open houses come directly out of an agent’s pocket. For instance, Terri Murphy calculates that she spends a minimum of $490 on each one of her listings.
But more than counter-balancing the cost issue is the fact that agents know how difficult it is to obtain a listing when they propose a below-market price. Indeed, most sellers think their homes are worth 25 percent more than they actually are, Dillingham contends.
“The vast majority of the time, sellers want more than the market will give them,” he says.
Are you determined to set a price for your property that’s neither too high nor too low? Then these pointers could prove of value:
-Never forget the folly of overpricing.
Seasoned agents know it’s a mistake to overprice a home at the outset, even though you can always cut the price later. That’s because your best prospects are likely to learn of the property during its first few weeks on the market. And these good prospects will be long gone by the time you get around to cutting the price.
-Take the time to collect the pricing views of several seasoned agents.
“It annoys me that people will spend more time planning a holiday dinner than selling one of their largest assets,” says Murphy, author of “Terri Murphy’s Listing & Selling Secrets,” a new book by Dearborn Financial Publishing.
Murphy suggests you consult three experienced agents to determine the “hot spot” on the pricing spectrum for your specific property.
A key measure of an agent’s ability to properly price a home can be determined quantitatively, through the agent’s “list-to-sell” ratio, Murphy says.
To determine list-to-sell ratios, ask three prospective agents this question: “What percentage of your initial listing price did you obtain for your client on your last three sales?” Murphy advises. Generally, the higher the ratio, the better the initial pricing strategy.
-Consider gaining an appraisal for a truly unique property.
Is your home a historic treasure, a waterfront property or an architectural monument?
Then, just as with any extraordinary asset, such as a piece of fine jewelry passed down through the family, you may wish to get a professional appraisal done before you set a price, Murphy says.
-Don’t count on that “refinance” appraisal you keep in the top drawer of your desk at home.
Real estate agents know from experience that the appraisals done for lenders who have been asked to make a second mortgage or home equity loan on a property often come in richer than those done in a home purchase situation, Murphy says. Why? Because the refinancing lender may require that you retain more equity in the home than did your original lender, thereby protecting his position in the event of foreclosure.
-Leave only a small “cushion” in price for negotiation.
Many home-sellers mistakenly believe there is little hazard in putting a high price on a home. After all, people can always “make an offer,” they reason. But the reality is that most buyers don’t make offers substantially below the asking price. Instead they simply never look at the overpriced house, Dillingham says.
Your original asking price should be set at 93 to 95 percent of what you expect to get for the property, he recommends.
-Remember that housing markets are fluid.
Maybe your neighbor–the one with the nearly identical house on the nearly identical lot–last year got $10,000 more than the realty agents you’ve consulted now think your house is worth.
But that doesn’t mean your place can fetch as much today. Maybe your home has lost value because a local employer has closed a plant or because you’re facing an unusually high level of competition in the neighborhood, Murphy says.
“Real estate, just like the stock market, can change daily,” she says.
