Great Post by Chris,
Listing agents get asked all the time by prospective home sellers: What is my home worth?
While this may sound like a vague answer and sellers do not want to hear this: Your home is worth whatever a buyer is willing to pay for it.
The seller can choose to disagree with a buyer's viewpoint, and keep their home on the market until the market (one buyer) meets your expectations, and sometimes it works if you wait long enough (sometimes years), but sometimes this strategy does not work.
While there are many ways to look at initial asking prices and potential sales prices, such as (not an exclusive list by all means):
- Recent comparable home sales
- Current competition
- Analyzing the above via:
o Square footage
o # bedrooms & # bathrooms
o Geographic proximity
o Condition, features
There are many variables that may, should and oftentimes does influence pricing (initial and potential sales price) which sellers and listing agents do not often discuss, or discuss in detail as much as they should. These variables create complexity, uncertainty and can conflict with each other. A good listing agent takes all of this into account and should be able to put it into context for a seller after conducting both a thorough review of the property itself as well as a thorough interview with the seller(s):
- Absorption Rates - community and individual sub-market
- Months Supply of Inventory
- Sub-market Trends - positive, neutral, negative
- Seller's true motivation
- Seller's timing requirements
- Occupied or vacant
- Design, décor
- Functional obsolescence
- Age of major components (roof, windows, furnace, AC, kitchen, baths, flooring)
- Condition of adjoining properties
- Smells - Cats, dogs, smoking in the home
- Cleanliness of home
- How easy will it be to show the home
- Seasonal fluctuations -- Time of the year the property enters the market
- Quality of the marketing - or lack thereof. Describing the features and benefits has a huge impact. Exceptional digital photography is key. Exposure via website syndication, and a host of other technology related tasks.
- Evaluation - Are there any obstacles that would prevent a sale and/or have an impact on your sales price? What can be done to eliminate or minimize these obstacles?
- Home Staging - Will the home be staged or placed on the market as-is?
- Room Re-Design/Re-purpose & Renovation - If buyer expectations are high today regarding condition, and the seller has some financial flexibility, a better way to protect a seller's financial bottom line is to make cosmetic or real improvements versus having a price reduction(s) to affect a sale. How could this be accomplished? Cost? Timing?
- Negotiating Expertise - The negotiating expertise of the agent is key.
- Cost Effective Resources - Repairing/remedying home inspection items, radon, Point of Sale (POS), etc., can impact a sellers' financial position.
- Commission - This impacts a seller's financial bottom line.
- Is your home outside the norm of your neighborhood - largest home? 3 bedrooms in a 4 bedroom neighborhood? 1st home in a huge development? Siding when most homes are brick?
While you as a seller may not want to wrap your brain around all these concepts in detail, it is important that you know that these concepts do exist, that they should be factored into every conversation regarding price and length of time on the market, and any agent you are contemplating to represent you -- should be able to connect the dots for you so you can make a well-informed and educated decision regarding the single-most important aspect of selling your home.
A related and follow-on question often asked is: How long will it take to sell my home?
While this is a valid question, and looking in the rear-view mirror, one can guesstimate based on prior sales how long it will take by looking at both averages, and the closest comparable homes. This too is a guesstimate as some of the above bullets will influence the answer to this question.
Think all listing agents are alike? Interview 3-5 agents and see how an agent stacks up to the above criteria (which is by no means an exhaustive list) and you will quickly see qualitative and quantitative differences in the expertise an individual agent possesses and demonstrates.
Choose your listing agent wisely! Your ultimate success (or lack thereof) as well as your financial position in the transaction largely depends on it!