fundamentals of pricing strategy
TRANSCRIPT
Fundamentals of Pricing Strategy: Selling Homes for Top $
Shannon Register Broker / Owner, Register Real Estate Advisors
Owner, RREA Media Host, “Houston Real Estate Radio” on NewsRadio 740 KTRH
13th Annual Spring Home & Garden Show March 7-‐8, 2015
Agenda
• Which Market Value? • Fundamentals of Pricing Strategy • MulXple Offers To Get Top Dollar • AccounXng for the Upgrades • Free Home Value Reports • Pricing in a Changing Market & Appraisers • Resources
Which Market Value?
• Tax Value • Insurance Value/Replacement Cost • Zillow’s ZesXmate • Appraisal Value/Lender’s Value • Market Value to Re-‐Sell • Demand…
Tax Value
• The Annual Fight – Yourself or Hired Out? – Realtors have the ammo you need!
• Lower is Beeer • Homestead ExempXon
Insurance Value
• Based on Replacement Costs – Cost to Reconstruct – Based on Labor/Materials
• Cost MORE or LESS than sales price? – Buying a view -‐ replacement may be low – Buying a foreclosure – replacement may be high
• Past Incidents
Zillow ZesXmate
• Understanding AVM’s – Hundreds of Automated ValuaXon Models
• RREA’s Free Home Value Report • Value of a Realtor
Appraisal Value • Why Does A Lender Require An Appraisal? • Best Time of Year for an Appraisal • Appraiser’s Look Back – Don’t See Demand • Management Companies • Can You Fight An Appraisal?
Market Value
• Value = What Buyers will pay for similar homes
• NEED is not an acceptable excuse for Overpricing
• CMA – there’s NO standard
Market Value Loca%on + Condi%on + Market + Price =
Your home will sell @highest profit & quickly when all these ingredients are combined perfectly! • LocaXon – Schools, traffic, commute • CondiXon – Maintenance, Smell, Staging • Market – Recession, InflaXon, interest rates, mortgage terms, compeXXon, DOM
• #1 Price – too low you lose, too high you sit on the market. (Ways to ensure it’s priced right)
CMA – There is NO Standard There’s a standard for what it is & what it means,
but not for how you get it!
• HAR.com – Tempo – Fusion – Stats
• Realist • Realtor.com • RPR Report
• Company Specific • No Realtors Use Zillow
• CombinaXon of All • Knowledge is KEY
CMA Info • Prices of Similar Homes that Have Sold Recently • StaXsXcs (Price Per Sq Ft/Sq Ft of Homes) • CompeXXon • Pending/Expired • 3 Prices – List, Sales, Your Net • AbsorpXon Rates
**Sellers typically sold their homes for 97% of the lis%ng price, and 47% reported reducing the asking price at least once**
Demand
• Prices Increase • Appraisals May Not Increase • MulXple Offers • Quick Sale • Choice on the financing & other points • Fewer Seller Concessions • Back Up Offers
Fundamentals of Pricing Strategy
• Pricing Your Home • Pricing Guidelines • Choosing a Realtor • EvaluaXng Your Property • Pricing Pyramid
PRICING YOUR HOME
• Sesng the proper asking price for your home is the single most important factor that will determine the success or failure of your home sales.
• The consequences of making the wrong decision are painful. If your home is
priced too low, you will literally be giving away thousands of dollars that could have been in your pocket.
• Price it too high, and your home will sit unsold for months, developing the
reputaXon of a problem property. • Failure to understand market condiXons and properly pricing your home can
cost you thousands of dollars and cause your home not to sell … fouling up all of your plans.
PRICING GUIDELINES • What you originally paid for the property does not affect its
value. • The amount of money you need to get from the sale of your property
does not affect its value. • What you think it should be worth has no effect on value. • An appraisal does not always indicate what your property is worth
on the open market. • The value of your property is determined by what a ready, willing,
and able buyer will pay for it on the open market, which will be based upon the value of other recent closed sales. BUYERS DETERMINE MARKET VALUE!!!
Choosing A Realtor • A REALTOR® has no control over the market condiXons, only
their MarkeXng Plan • Never select a REALTOR® based on the price they promise • Select a REALTOR® based on criteria about their company, the
experience of the salesperson, services provided, and ability to negoXate.
• It would be smarter to select a REALTOR® first, then agree on price.
• Don’t allow agents to ‘bump up’ the price to obtain your lisXng. True professionals will give you truthful feedback and accurate informaXon so you can price to sell
• How was their CMA? • Professors = Doctorates, Physicians = Medical Degrees,
REALTORS HAVE DESIGNATIONS!
EvaluaXng Your Property PRICE -‐ Stated amount an owner is willing to accept for a property COST -‐ The amount plus any capital improvements made since the purchase VALUE - The amount a buyer is willing to pay REGRESSION & PROGRESSION – Effect surrounding home sizes have on the value of your property. Regression is the decrease in value when surrounded by smaller homes; Progression is the increase when surrounded by larger homes.
EvaluaXng Your Property MARKET VALUE -‐ The amount that will bring a sale between a willing buyer and a willing seller. It is based on the history of similar properties recently sold in the area (CMA). SUBSTITUTION -‐ Substitution refers to the actual value of an amenity. Value is determined not by the cost invested in a property, but by the value derived from it.
Example: Home with more expensive well is worth no more because the value is in the water, not the cost of obtaining it.
**SPOILER**
Value is determined by what a buyer gets OUT of a feature…not what an owner
has IN it.
Benefits of Proper Pricing • Fast Sale – save on carrying costs • Less Inconvenience • Exposed to More Prospects – Pyramid 60% Buyers
• Higher, more compeXXve offers – buyers are less likely to make a low ball offer for fear of losing out on a good deal
• More Money to Sellers -‐ net more due to higher price and fewer carrying costs
Drawbacks of Over Pricing • Reduced AcXvity – Agents won’t show if they feel it’s overpriced
• Lower Ad Response – Buyers will move on to beeer priced homes
• Loss of Buyers – Home will seem inferior compared to other properXes at that price point
• Helps your compeXXon – your high price makes other homes look like a good deal
• Causes Appraisal Issues • Lower Net Proceeds – Increases carrying costs
MulXple Offers for Top Dollar $
• If pricing is 15% below market value, we know from the pyramid that 90% of Buyers will be looking at it.
• Benefit of MulXple Offers – More OpXons – Choose Price – Choose Financing
AccounXng for the Upgrades
• Law of diminishing returns on Improvements
• Well Example – Top Dollar Top Return
• Upgrade for your own enjoyment, but Repair based on what buyers want
• RPR Report – FREE Home Value Report • Plug in your upgrades before you do them! • Not all Realtors can do this for you
Pricing in a Changing Market & Appraisals
• For Appraisal Purposes, best Xme to sell is…
• For Demand Purposes, best Xme to sell is…
• Best Xme to buy a new construcXon inventory home is usually…
• Best Xme to sell your home is…when your neighbor’s home IS NOT for sale.
• Realtor.com • HAR.com • RREA.com/value = Free Home Value Report • REALTORS
QUESTIONS?
