What about all the money we’ve put into the home?
In reality, it’s rarely possible to recover all the value from an improvement. The final question determines how many buyers would attach the same value to an improvement that you as the owner would.
- When were the improvements made?
- At that time were you planning to sell or stay?
- If you had known then that you were going to sell today, would you still have made improvements?
- If the improvements were removed, what percent of today’s buyers would put them back?
Principle of Substitution
Value is determined not by what a seller puts IN a home, but by what a buyer gets OUT of the home.
How does the property in your neighborhood affect the price of your home?
When a property is oversized for the neighborhood, it often experiences the adverse effects of regression — the value is reduced through the influence of less expensive homes. In contrast, progression demonstrates that value can be increased by more expensive surrounding homes.
How can the correct price attract buyers?
Think of price like a magnet. When the price is too high, it doesn’t attract buyers. As the price moves closer to market value, it attracts buyers in that range and produces a sale. A price closer to market value attracts more buyers.
What external factors affect the value of a home?
Many influencing factors are completely out of a homeowner’s control. The economy, interest rates and financial markets can negatively affect values.
External Influences
- Interest rates
- New listings
- Area competition
- Local economy
- Builder offerings
- Neighbor’s price
Internal Influences
- Location
- Size
- Amenities
- Condition
How do buyers react to homes that are overpriced?
You don’t want to become a “Pinball Listing”. In a pinball game the ball bounces off bumpers (overpriced homes) to scoring positions (properly priced homes). Buyers “bounce” off an overpriced listing into properly priced homes instead.
By overpricing, sellers end up with a home that doesn’t sell, while buyers continue on with their lives. Price properly and you’ll get the buyers to change their behavior. Don’t be a pinball listing — buyers bounce off overpriced homes, making other homes appear more attractive.
The benefits of pricing your house to sell
Don’t overprice your home during the period of highest activity, only to lower the price after the buyers are gone. Price it right during the initial phase of exposure to capture the best buyers.
Up to 60% of sales are generated by cooperating agents. Overpricing will deter them from showing to their prospects. When a home is priced right, buyers get excited and make higher offers.
Advantages of Proper Pricing
- Faster sale
- Less inconvenience
- Increased salesperson response
- More internet response
- Better sign and ad response
- Avoids being “shopworn”
- Attracts higher offers
- Means MORE MONEY to sellers