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by Vince Tornincasa
How do you properly determine a listing price? The value of a property is actually determined
when you have a willing buyer and seller that agree on the purchase price. Inventory and the
number of homes for sale goes up and down with supply and demand. At times, we are in a seller’s
market and at other times, we are in a buyer’s market. Comparable listing and sales information can
assist an owner in determining a range in which the property will most likely sell for, along with the
current real estate market trends.
There is a very real tendency for sellers and agents to over price a listing and it is easy
to do. Sellers have an emotional and financial interest in their homes and this often translates into
a list price that is not in line with the current market conditions. For example, sellers will often
compare their home to a recent sale in the neighborhood and believe that their home is worth more
because of... fresh paint, a new fence, covered patio, or??? And sellers will like wise discount the
improvements of other neighborhood homes that are for sale, pending sale or sold. It is incumbent
upon the agent to give the seller an honest evaluation of their home so they can make their plans
for the future based on accurate information. The old saying, “Garbage in…garbage out!” is so true.
Some agents believe the best way to secure the listing is to bid up the price to the
owner, especially if the owner is interviewing other agents for the job. For an example: if
the property should be priced at $400,000 and the owner thinks it should be $450,000, the agent
may agree or even suggest $475,000. This is what is called buying the listing. Saying what the
seller wants to hear is an excellent way to get the job, but is it ethical? I think not. This scenario
often works like this: the over priced listing is reduced over a period of time until it sells, or, in a
seller’s market over time, the list price becomes market value. No amount of advertising, whether it
be newspapers, open houses, virtual tours, etc… can magically sell an over priced listing. Buyers
are extremely educated when it comes to investing in real estate. After all, it is the information age
and they will know value when they see it. If you discover during the listing period that you have
your home over priced, then it is important to take bold action and reduce the price to what it
should be. Small reductions, although easy to do, will not get the job done. There is no substitute
for proper pricing.
In a seller’s market or buyer’s market, I like to lead the market. For example, if homes are
selling quickly for higher and higher prices then it is a good idea to price properties (5% plus or
minus) higher than what the comparables are showing. Like wise in a buyer’s or a stable market,
you want to price your home at or below comparables to attract buyers.
Remember, any property will sell regardless of its condition or location if it is priced