Pricing It Right

I love working with a seller who becomes knowledgeable about the local market when pricing his property for sale.

It doesn't matter what a seller paid for the property. Or what he put into it. Or what his neighbor sold his house for a year ago. Or what he needs out of it.

What matters is what similar properties are selling for now. Two operative words: similar and now.

To set a price we need to find a property that is close in age and size and features. Usually in a subdivision, that's not difficult. Reaching outside the subdivision is more of a challenge - but not so much.

We're looking for what has sold within the past three months. What is distressing - no pun intended - is that most of what is selling are short sales and bank-owned foreclosures. Those are distressed properties. Sometimes the condition of a distressed property is very poor and the price reflects the condition. Sometimes not. Sometimes a bank-owned property has been painted and newly carpeted and spruced up. Sometimes a short sale has been occupied and maintained by the homeowner up until the time of the sale. But in either instance, the sales price reflects that it is a distress sale - meaning that if bank-owned, the bank needs to sell it and if a short sale, the seller's lender has agreed to sell it usually at a price some percentage lower than market value.

So what that means is that the seller, when pricing his property, must price it where the recently sold properties in his neighborhood have sold, whether those are distress sales or not.

What happens if he doesn't?

If he gets a cash buyer, great - if the cash buyer finds something about the property that appeals to him enough to ignore prices of recent solds in the neighborhood.

If he gets a buyer who is borrowing in order to purchase, the buyer's lender will require an appraisal - and the appraisal is determined by recent solds. Like it or not.

Or no buyer steps up at all because the price is higher than the neighborhood.

Sellers who are just hoping for a cash buyer to come along may be in for a big disappointment, even as the inventory shrinks. Buyers - either those with cash or those who are qualified to get a loan - are very seldom willing to make an offer that looks like they are paying too much.