Aside from the condition of your house, it’s age and location, the sales price is probably the most important detail that any buyer looks at when deciding to make an offer. In reality it begins much sooner than that. In today’s real estate market 90% of all buyers start their home search online without the benefit of a real estate agent. In doing so they are generally armed with their lenders pre-approval or pre-qualification and a sales price that they believe they they can afford.
That specific dollar amount is pretty much the boundary of their financial ability to buy a house. If they are pre-approved for $325,000, very few will even look at houses priced any higher. If your house falls with in their parameters than you have a potential buyer.
How important is selling your house?
That is the real question that every seller must answer, because believe it or not your house is competing with every other house on the market and most buyers know what they are looking for. Your asking price, determines a number of factors and most importantly at what level your home will be scrutinized. You should make every effort be realistic about what that means when looking at all of the factors that determine the houses value. The big three are the houses age, its condition and of course it’s location.
If one of those is out of whack, your plans of selling fast or for the top of market may be thwarted. It really is that simple. Sure there are other amenities or features that may come into play. Does the house have a pool, laundry room, a finished garage? There are no magic wands and there certainly are no pricing guides that let you add and subtract our a specific dollar amount when it comes to individual things like bedrooms and baths. I have sold brand new houses that have been two doors down from one another and thought that one would get a higher sales price than the other. Boy was I right, but in reverse. Go figure.
The truth is, that you will never know what buyer is going to walk through your house and see something that they have to have, or for that matter what they just hate. Maybe it is the landscape, or the size of the yard because they like bringing their lifestyle outside. Maybe it’s that gas or electric stove because they love or hate to cook. The fact of the matter is, that it’s the buyers that really determine the sales price and the appraisal and bank approval are just their validation. Sometimes you get lucky on all three for the real estate trifecta.
Having purchased over 100 homes I can attest that it is really easy to evaluate a house based on the price that someone else sets. You either see the value or you dont. At that point it is a negotiation and I have often said that I will happily pay your asking price if you allow me to determine the terms and conditions of the sale. Pricing a house is really about the balancing act between what you as the seller want, and the value of the house that someone else is willing to pay. So, In today’s blog post well discuss the challenges most homeowners face when setting a price.
In this Seller’s Market: How Important Is The Asking Price?
Pricing a house is not exactly like figuring out reentry into the earth’s atmosphere, but price your house wrong and you’ll wonder what happened? Ask too little and you feel like you could have gotten more. Ask too much and the silence will be deafening. Either way every house needs to be evaluated on its own strength and weaknesses. Each homeowner should be realistic about their houses ability to compete and be prepared to address each of the issues the house presents based on the overall buyer expectations.
So as I write this, we are still in a sellers market and real estate prices are still at the highest point in the past 10 years. It doesn’t mean that someone is going to walk up with a bag of cash and offer you whatever you want without any inspections, appraisals or other contingencies. It does mean however, that if you are needing to sell your house, now is the best time to do it with the hopes of getting the most amount of money. But, every seller should be realistic about what their house has to offer. Over price it and the market will be the judge.
Homeowner Fears When Selling a House in Sacramento
Believe it or not your fears about selling your house are not unique. There is something about making the decision to sell a house that brings with it a certain amount of anxiety. I am pretty sure that it’s a combination of the unknown and that there is so much riding on what happens during the sales process.
Most people have all of their hopes and dreams attached to what they perceive as the equity in their house. They see the sales price as a direct link to their equity and that translates into the ability to leverage themselves into the next house. In some cases it is all that they have so every dollar counts. So, it is understandable that most sellers are anxious and know that just a few missteps, a low offer (or no offers) and a few extra months on the market and a lot of that equity can disappear in holding cost and other fees.
They also know that each step of the way there is an added level of scrutiny that the house is subjected to. It means that every step once the for sale sign is planted in the front yard and the listing goes active on the Multiple Listing Service, is a potential for the process to come to a grinding halt. Houses that are sold conventionally with financing face the greatest amount of scrutiny because it is the lenders job to make sure that the buyers know exactly what they are getting into. Sellers know this and that is why there is so much anxiety about each step along the way;
- Setting the Pricing
- Home Inspections
- Wood Destroying Pest
- Borrower Qualifications
- Bank Conditions
- Repair Cost
- Update Cost
- Holding Cost
- Buyer Concessions
The biggest fear that many homeowners have when considering selling a house it that it will just sit without an offer. This is for good reason. like I said earlier the sales price dictates who sees your house. As a result, a lot of homeowners hang on to an unwanted house because they believe that the houses condition will drive down the price and they just dont understand the balancing of the value and the money that someone else will pay. I often shock people with the amount of money that we will offer for a house without any inspections or appraisals or repairs.
The Pricing Delima: How Important Is The Asking Price When Selling A House
Imagine for a moment that you’re sitting at your kitchen table, talking it over with your spouse, both of you ringing your hands over the best price to list your house and the best way to maximize your equity. You know that every dollar that you spend to sell your house will come off of the top and leave you with less money at the time of the closing.
You also know that if you hire a real estate agent you are going to need to pay for commissions and other marketing and closing cost. Are you going to load those into the sales price? Afterall it is the seller that pays 100% of the commissions in real estate.
What about your cost of cleaning, repairs, updates and staging?
I am going to say this now. Real estate agents are high maintenance and they love to spend your money. In fact, they are going to ask you to spend a lot of money on the hope that you will fix as much as you can and sell your house fast and for the highest possible amount. Sounds great right? Except maybe for the spend part, because they are going to recommend that you fix everything because they want you to eliminate any of the hurdles that can come up in the sales process. But the cautionary tale is this. Fixing everything and updating everything does not guarantee a quick sale or one that nets you the most money. There are alternatives to selling a house and spending thousands of dollars.
What if you Sold Your House As Is
Sometimes you need to step back and look at your house realistically. Sometimes the deferred maintenance is so bad that just fixing everything can cost upwards of $50,000. Is that really going to solve your problem if when you are done, it means that your house and its original design in 1952 is just fixed.
You may want to sell it as is and just spruce up a bit, but will that be enough to cover their commissions and fees? Believe it or not there are divergent paths that you can take. One leads to spending a lot of money and asking for top of market. The other is to sell it as is and maximize your equity without taking on too much risk. This article is about both.
So how do you determine the best route to take? How can you evaluate how much you will make if you fix everything as opposed to fixing the bare minimum, if anything at all? It’s not as easy as it sounds and a lot of people are conditioned to follow the conventional wisdom just spend a lot to fix and update and hope for the best. Hope is not a great financial plan and sometimes you just need to roll up your sleeves and do your homework.
Doing Your Homework is Important for Proper Pricing
You have scoured all of the real estate sites and you’ve gone to open houses within a quarter mile radius of yours. You’ve examined the condition of these houses inside and out and compared them to your own. You’ve noted the positives and negatives as compared to the other houses and you are ready, but the price is still a sticking point. You want to sell, but you are on the fence. You dont want to set a price. You want the buyers to tell you how much because you fear you may have made a mistake and or better yet a buyer may show up unprepared and offer you more than you were thinking.
It is all possible, but regardless of how likely either scenario will play out you will never know until you actually set the price.
Incorrect pricing is the biggest problem with houses that just linger on the market. If you are thinking about selling your house in Sacramento, Stockton or Modesto, the price the threshold sets the tone for everything. Most people live in a bubble outside of real estate and feel like they are peering inside a complex web of pricing models and advanced equations when in reality, establishing the price is pretty simple. Pick a number. The market will respond and you will see right away what the results are. If you can’t do that, read on.
Sometimes You just Want a Sounding Board, Interview the professionals in Sacramento?
It doesn’t matter what the product, companies spend millions on studying the competition. They put together consumer focus groups and survey the market to determine price points for all kinds of products. Houses are just like other products and must compete and it is the seller’s job to find that sweet spot between what they want and the buyer is willing to pay.
Your research could include having someone else evaluate your house before going live and or setting the price. In some ways the best way to do that is to order a couple of home inspections before you sell. If it were me I’d order two; 1) a wood destroying pest and 2) a general home inspection. The inspectors are notorious for rooting out every flaw. The detailed reports tend to scare and/or anger everyone, but, as the seller you will know in advance what defects potential buyers will find prior to it going into escrow. Those inspections are going to cost you roughly $250 to $350 per inspection and can be a foundation for establishing your sales price.
If it is one thing that I am confident about is that there are a whole lot of people that can advise you on pricing. Between Real Estate Investors or Cash Home Buyers in Sacramento, Appraisers and Real Estate Agents you can gather a lot of data. Certainly the easiest and least expensive are getting a Comparable Market Analysis from a real estate agent or Cash home buyer.
Both are going to approach your house from different perspectives. The cash home buyer is going to start from a cost basis factoring in the cost of repairs. They are most likely going to determine an after repair value based on sales data in the neighborhood (Fair Market Value) and back out the cost of repairs and some holding cost. That will be their offer.
The real estate agent is going to tell you what the house will sell for based on the sales data once you spend lots of money on repairs. While real estate agents are not the world’s greatest sales people, they also have a lot of data available to them that assist them in evaluating and setting a price for your house. That CMA is FREE and then you can determine what the best solution is for you. Is it to hire a real estate agent with a 4 to 6% commission or just sell the house for cash?
Your List of Advisors
- Home Inspections
- Real Estate Agents
- Real Estate Investors or Cash Home Buyers
Maybe it is. Maybe what you need to do to complete your research and pick up the Phone call at least 3 real estate agents. Set up appointments to do interviews and act like you were going to be hiring these people and paying them top dollar to do the job. After all that is what you will be doing if you do hire them.
Ask each to prepare a comparative market analysis (CMA) for your home specifically. Look at the numbers that they give to you. The last thing you want to do is the work for them. If what you’re looking for is validation then you need to have an independent analysis of what they think backed up by the real sales numbers. Based on their research and their experience .
The time to merge that data is after you’ve seen it all from all 3 real estate agents. Certainly you can ask questions in between and have them drill down on those numbers. By the time you get to the 3rd agent you’ll have your validation or change your mind.
Whatever you do don’t be like 72% of all sellers that hire the first real estate agent that they talk to because they dont want to do the work. Maybe that is the reason that nearly 40% real estate listings expire without receiving even one offer?
Or it because over 80% of all real estate agents fail within the first 5 years. The real question is which real estate agent are you talking to? The real estate agent in their first year or the one in their 5th year?
So when a homeowner says I just want to sell my house in Sacramento. They want Be able to make that decision and walk away confidently knowing that they have the ability to do it based on the numbers for houses that have already sold.
So, just how important is the asking price when selling a house in Sacramento?
It’s very important to help a house sell. But it’s not the only way to sell! If you’re not sure what your asking price should be, or if you’d like to skip the sales process altogether, you can get a cash offer from us! My name is Peter Westbrook and I am a cash home buyer. We buy houses in Sacramento in any condition and if you want an independent third party evaluation of your house, give me a call. I will walk you through the process of selling for cash. You might be surprised how simple it can be.