Debe Maxwell, CRS “Absorption rate pricing is an old but, often over-looked method used by real estate professionals to calculate the value of your home. The calculations are based upon the principles of supply and demand.”Right on target – and – re-blog!
Pricing Strategies to Sell your Charlotte Home in Any Market
The single most important factor in selling your home is pricing the home correctly. Many sellers feel compelled to ‘try’ at a higher price but, if you have not received an Offer after 5-7 days, chances are, you have already shot yourself in the foot – so you MUST immediately reduce the price. After 14-21 days, demand and interest in your home will be reduced significantly, costing you thousands of dollars.
Many sellers fear that if they price their homes too low, they will be ‘leaving money on the table.’ In a sellers’ market or any market, for that matter, this rarely happens – homes priced below market value will often receive multiple Offers, with sellers most likely receiving above or at least, market value.
This graphic reflects the percentage of the potential buyers you can expect to come through your home, depending on your price point and its proximity to the current market value. Note that overpricing even by as little as 10% mean that only 30% of the buyers who are qualified to purchase your home, will actually see it. Of course, pricing below market value will attract the most attention. However, your chances of selling your home at market value are increased when pricing your home correctly – right on the money, at market value.
Now, let’s talk about supply and demand in the real estate market
Active real estate agents are keenly aware of the market and understanding supply and demand is key when calculating price for sellers. Assessing the absorption rate is our first approach.
What is Absorption Rate Pricing?
Absorption rate pricing is an old but, often over-looked method used by real estate professionals to calculate the value of your home. The calculations are based upon the principles of supply and demand. Because appraisers are now using Absorption Rate Pricing to determine your home’s value, it is critical that you understand how the process works.
There are only a certain number of Charlotte homes that will sell in any market in any given period of time. For example, if 12 homes sold in the last 12 months in a given market, that means that the market will absorb 1 house per month on average. If there are 10 homes currently on the market, there is a 10 month supply.Less than 6-month supply is considered a sellers market.
A 6-month supply is considered a balanced market.
More than a 6-month supply is considered a buyers market.Read more about how we calculate absorption rates.
Here is an example of how we will use absorption rates in calculating a suggested list price for your Charlotte home:
Next, let’s talk “comps”
Realtors® use comparable properties (comps) as phase II in determining the value of your home. We will locate…Recent nearby sales, similar to your home
Properties that are currently for sale
Properties that are under Contract or pending sales.
Withdrawn homes nearby
Homes that have expired when listed within the last 6 months
FSBOs (homes that have been listed by owners only)
When evaluating the above data, we will -Look at each home within your neighborhood with any of the above criteria. Note that we pull comparables similarly to an appraiser but, we are not licensed appraisers.
Eliminate properties that are not ‘similar’ to yours – if there are not 3 similar properties that have recently sold, we can assign values to updates and square footage pricing to adjust the comparable properties.
Appraisers will typically consider homes that are within 10% of your square footage measurements of heated space. For example, if your home is 3,000 square feet, comparable properties that the appraiser will use will need to be between 2,700 square feet and 3,300 square feet.
Comparable properties need also be of similar construction and age.
Comparable properties will be pulled within one mile of your home (otherwise known as subject property), taking care to note any major roads or industrial-facing homes, applying the appropriate reduction in value of said property (as a positive for the subject property).*NOTE: Unique properties, especially those in rural areas, will require a search over 1 mile from the subject property. As well, homes such as historic landmark homes can have comparables pulled from anywhere within the 12-county radius.
Now, let’s do a bit of investigating of each comparable property we located…What was the original list price?
What was the actual sales price?
Were there any seller concessions?
Were the homes that sold upgraded similarly to the subject property?
If the home sold above list price, I contact the listing agent – Did the home appraise? If it did not, did the buyer bring the difference to Closing or how was that resolved (i.e. were there additional Seller-paid Closing costs)?
Why did the expired, withdrawn or FSBO listings not sell? Chances are, either pricing, condition or location within the community prevented their sale.
How were the expired listings, withdrawn properties or FSBOs marketed?
With regards to pending or under Contract sales – how long were they actively listed before an Offer was received and the home was under Contract? Days on the market tell a lot about pricing and what price was received by the pending sellers.NOTE: The average square foot cost does not apply to all homes within the community – across the board. The price per square foot increases as the home size decreases and visa-versa. Yes, it’s true, larger homes have a smaller square foot price than smaller homes.
Next, consider market trends
Now, we are going to look at the overall market, taking into consideration how the market absorption rate.Are we in a sellers, neutral or buyers market?
How many month’s supply do we have in your community?
In a sellers market, with little or no inventory, what was the increase in value over the past 1-, 3- and 6-month period? We will factor in an increase based on that history.
In a neutral market, with no historical value increase, there will be no adjustment in suggested list price.
In a buyers market, with a significant amount of inventory and perhaps seeing a tick downwards in depreciation, your price will need to be adjusted accordingly.
There is much more to pricing your home than looking at the national websites and taking into consideration their faulty estimates. It’s also not as simple as pricing your home the same that your neighbor’s home is priced either. Other factors include:
Does your home have a pool?
Is your master bedroom on the main level in a community that is a preferred floorplan?
Conversely, is your master upstairs?
Do you have space for a second living quarter?
How improved is your home compared to others in the community? (And I’m not talking about fresh paint – I’m referring to kitchen & bath updating and outdoor hardscaping.)
Has your home been well-maintained?
How is your landscaping?
Do you have hardwoods or carpet on the main level?These are but, a few of the items that are important to buyers and each year, the list of ‘must-haves’ change in the minds of buyers. So, if the price that I suggest for you does not agree with the price that you had in mind before we met, let’s talk!
Let’s discuss the manner in which you arrived at your number. If we’re still a bit apart in our pricing, let’s go look at the homes that your buyers will be touring – let’s check out the competition, in person.
If there is still a question, a $400 appraisal may be warranted.
Pricing is KEY to a successful sale – and a timely one as well.
Yes, real estate is all about ‘location, location, location’ but, there is nothing that we can change about the location of your home. Pricing and the condition of your home move up to the top of the list for you and we must first get our price in alignment for a successful and timely sale.
If you’re thinking of selling your Charlotte home, let’s talk! As with everything in life, preparation is key and I will equip you with what you’ll need to get you, as seamlessly as possible, through the home-selling process. Call or text (704) 491-3310 and let’s get started!
Hiring the RIGHT Charlotte Realtor® is critical to your home selling success!
© Debe Maxwell | The Maxwell House Group | CharlotteBroker@icloud.com | Pricing Strategies to Sell your Charlotte Home in Any Market
This post is Part 2 of my entry for Tony & Suzanne Marriott’s September Challenge – Your Value Proposition
This post was originally posted at http://www.icharlotterealestate.com/pricing-strategies-to-sell-your-charlotte-home-in-any-market/
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About the Authors – Updated 2017
If you are considering a Traditional or Short Sale of your home in Phoenix, Scottsdale or any location in Maricopa County Arizona, you owe it to yourself to talk with Haven Express @ Keller Williams Arizona Realty to determine whether Tony and Suzanne Marriott are the best real estate Brokers in the Phoenix and Scottsdale metropolitan area to help you with the Successful Sale of your home.
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