Tag Archives: Price

Pricing Homes for Sale

by Susan Lavery

When a real estate agent is listing a home for sale, he or she performs a CMA (Comparative Market Analysis) to determine what price the home should command in the current market. However, once the home is listed on the MLS or any other public site for potential buyers and buyers’ agents, there are two schools of thought as to the best way to get the highest price for the property.

Some agents overprice the property, figuring that many buyers like to haggle a bit in order to feel like they’ve gotten the best of the deal. When inventory is low (a “seller’s market”) and especially if the type of property and location are both in high demand, this strategy works very well.

Other agents take the opposite approach, listing a property so low that interest is keen and offers come in quickly. This can lead to a “multiple offer” situation in which buyers become so anxious and so competitive that they offer higher than they might have otherwise paid in order to “seal the deal.” The problem with this approach is convincing the seller to agree to it, because it is a bit of a gamble.

Theory aside, which method actually works best? We can look to statistical analyses of market history for the answers. What these show is that pricing a home 10 to 20% higher than similar homes in the same area results in a slightly higher selling price, and over 20% yields the best price selling price yet. Underpricing the market actually results in a selling price several hundred dollars less than the higher listings, in spite of multiple offers and so-called “bidding wars.”

This is tied to a behavioral trait known as “anchoring,” which is a common tendency to rely upon the first piece of information offered when making decisions. Home attractiveness and desirability are very subjective, and buyers will tend to rate and weight the features that justify the first price they see.

Many agents recommend underpricing a home in order to sell it quickly, which maximizes the agents’ profit when factoring in the time, effort, and money spent marketing it. And if a quick sale is important to the seller, the tactic is a good one. However, if time spent on the market is not important and maximum dollar return to the seller is, then it seems as if pricing a home up to 20% over market value will best accomplish that goal.

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WHY TO BUILD YOUR NEXT HOME

by Susan Lavery

It’s such an exciting time to shop for a home in South Florida. New home starts are up and builders are feeling more confident thanks to our improved economy. As the prices of short sales and foreclosures have risen, the prices of building new have remained stable or even dropped thanks to drops in prices of building materials, and it is now very possible to have a brand new home for the same price as buying a resale. All it takes is the patience to wait 6 months before move-in, and you can select your own style, colors, and finishes and have your new home move-in ready, complete with a 10-year warranty.

Believe it or not, it’s not as complicated as you may think. One local builder will even accept a contract for $1000 down and no construction loan necessary. Once the home is completed you can apply for a conventional, FHA or VA mortgage and proceed to close with your $1000 credited back to you. From what they have told me, they have so much confidence in the local market and the value of their homes, they are willing to take the chance because they know they can easily sell it for the cost of the original contract or more.

It may be the best way to have exactly what you want, exactly where you want it, and to lock in current market prices at no risk. So if you’re not a DIY-er and not in the mood to fix it up yourself,  it’s a really good option to have and I’m so excited to be able to recommend it as a good value and a worthy option. It’s also good to remember that our South Florida/Coastal building code is the most stringent in the country and has become even more so with each passing year. So you are looking at solid homes, built of concrete or concrete block and with hurricane strapping on the roof and hurricane-rated protection on all openings (including the garage doors).

More choices, more options, and a competitive market. It’s all good! Contact our office to learn more and we heartily suggest hiring a realtor to help you through the process. Our training and experience can help you through the process, determine if it’s the best choice for you and, as always, our commission is paid by the seller/builder!