There is perhaps nothing more important during the rehab process than understanding how to price the finished product. Regardless of how much time you dedicate to fixing up a property and how immaculate it turns out, a poorly priced home could potentially never sell. At the very least, poor pricing could force your property to sit on the market for way too long. Of course you are proud of the property you completed – and you should be. However, what you think the property should sell for and what the market dictates can be two very different numbers. Don’t expect buyers to share the same sentiment you do about a recently rehabbed home. There is a good chance they have no idea how much work you put in. Accordingly, the amount of work you did should not be a factor. Buyers will look at what is currently on the market and other recent sales in relation to the property in question. If you try to squeeze every dollar, you may be very disappointed with your bottom line. Therefore, pricing a property correctly is of the utmost importance.
As easy as it may seem, pricing a property correctly is a very in-depth process. There is a delicate balance between trying to get as much as you can and leaving money on the table. It is also important not to scare away potential offers. Listing too high will cause inactivity and will greatly reduce the demand. Again, it is a delicate balance. You need to price your property at a point that will draw a lot of interest. We are still currently in a buyers’ market. The supply still outweighs the demand. Gone are the days when you can list for a number and end up meeting somewhere in the middle. If you do not put your best foot forward with your initial list price, buyers and realtors will dismiss the property and may never come back.
Before listing the house, you should determine what your goals are for selling it. Are you looking to sell as quickly as possible, or are you after the highest offer? Are you willing to take a cash offer if it means that you can close in a few weeks? Putting this on the table before you list will give you and your realtor a clearer picture of where you need to be. It is also very important to make sure you compare apples to apples when evaluating other properties. It is natural to think that your property is superior to others on the market, but this is often not the case. Your property may be newer and have superior updates, but that alone does not make it more valuable than other homes in the area. If you are as honest as you can be regarding your real value, it will lead you to a more accurate list price.
Shooting for the moon and listing too high will have a ripple down effect on your property and your business. The greatest demand for a property is when it first hits the market. In particularly competitive markets like Seattle and Phoenix Most buyers and realtors will track new listings and are eager to pounce when they see a new one. Once your home is out there for a few weeks, it will lose appeal and realtors will quickly move onto other new listings. By listing too high, you lose any buzz in those valuable first few weeks. Buyers will not want to see a property listed for $249,000 when there are comparable homes listed in the area at $219,000. The longer that your home sits on the market without activity, the more buyers know that the demand has been reduced. This will lead to lowball offers from buyers thinking that you are desperate and you would consider any offer. If you don’t strike while the iron is hot and make a good first impression, you will lose many buyers in your area.
If your property is sitting on the market for a prolonged period of time, you need to consider a price reduction. In doing so, the reduction must catch the attention of everyone. That’s right; it needs to be a significant reduction. Reducing $5,000 or $10,000 is often not enough to make any buyers that dismissed the house before to come back. Using the same example as before, your list price of $249,000 should be reduced down to the $219,000 range to have an impact. If you had just listed at the reduced price, you would not have wasted months looking for a buyer. Additionally, by listing at fair market value, there is a greater chance that you can attract multiple buyers thus creating a bidding war and shooting up the price. You may get lucky on a random listing in getting the price you want, but for the most part, you will lose many more buyers if you list too high.
If you are going to list higher than the market would indicate, you had better be sure your property warrants it. This means making sure all of the upgrades and improvements are better than other homes in the area. Additionally, you cannot overlook the importance of curb appeal. Just getting people into the property is a task in and of itself. Even if all of the criteria is met, you still can’t expect the market to jump 10% over other homes in the area. Your list price should be determined in close proximity before you start any work. The work will often determine the price and not the other way around.
Your list price is one of the things that you control as a seller that has a huge impact on buyers. You cannot control what the demand will be, but you can control the price you list at. Careful consideration must be made when determining this number. You need to spend ample time looking at the market and seeing what has sold. If you can’t get your property off the market, all of the hard work you did could end up going down the drain.