Last week, we discussed the two keys to success in selling your home were “presenting your home” and “pricing your home.” This week, we will look at the importance of having a pricing strategy to improve your chances of selling your home.
Home pricing may be one of the biggest decisions in life, because a home is often your largest asset and a sale can affect your personal net worth. The correct pricing strategy will produce the greatest amount of return, and a good pricing strategy can provide the best chance of selling your home. It is vitally important to have good information to guide you, and having access to current market data is paramount.
A pricing strategy incorporates four segments of information to guide you on pricing of your home, and a successful strategy incorporates all four.
The most important valuation is an appraisal created by a licensed appraiser or a market analysis provided by a professional real estate broker. The value will be determined by a comparison of sold properties compared to your property. Comparing homes in Durango is far tougher than in most city neighborhoods because the neighborhoods tend to have vastly different homes of different sizes, ages, finishes and conditions. Take a stroll through our traditional neighborhoods and you will see huge contrasts between homes. A professional appraiser or experienced real estate broker has the experience and expertise to determine the market value of your home. It is also why Zillow does not work well in our neighborhoods, since they can only compare sales prices nearby and use public records to guide its valuations.
This market valuation is what I call “the rear- view mirror” part of the pricing strategy, because it is looking at values that have already been created, but it lacks good information for a pricing strategy.
The second part of the pricing strategy looks at market conditions. The market may be moving upward, downward or sideways, and pricing to those conditions is necessary. In the early spring, there was a lack of homes on the market in Durango in-town neighborhoods, and there was heavy demand. Prices were moving upward, so savvy homeowners were pricing their homes above the previous sales points. During the Great Recession, sellers had to lower their prices because there was a downward trend in values. The market conditions in La Plata County can vary greatly in supply and demand, and your pricing strategy must incorporate this view, too.The third part of the pricing strategy is price point management. There are key price points that if a home is priced above the price point, sales activity will drop. If it is priced below the price point, sales activity will increase. In some cases, we see as much as 50 percent fewer buyers in a higher price range than a lower one. It is especially important if the sales prices are close to the $1 million price range, the $500,000 price range, and even some of the ones that are over the $100,000 price range. Checking out sales activity and inventory in both segments will guide sellers on managing the right price point. The fourth analysis involves directly comparing your home to the competitive homes on the market to determine the value differences between them. For example, if a home is for sale next door with the same attributes as yours, and if there is a price difference between the two properties, a buyer is going to make an offer on the one priced most competitively. Be aware that in a competitive market, other sellers may make changes to the price of their home while yours is on the market, so a seller must be diligent in staying comparable to the competition.Don Ricedorff is a Realtor at The Wells Group in Durango, and a past president of the Durango Area Association of Realtors. He can be reached at firstname.lastname@example.org.