Questions to help you analyze your pricing strategy:

Am I selecting a Real Estate Agent on services orprice?

Is the local market rising, falling or staying even?

Is my opinion of value based on the actual neighbor-hood sale prices?

How many homes in this area are competing againstmine right now? How does mine compare?

Have any neighboring homes been on the market toolong? Why?

Is my home consistent with, larger or smaller than thesurrounding area homes?

Which improvements have I made since purchase thatwill actually increase value? Which improvementswon’t?

Are my financial needs influencing my asking price?

Is my original purchase price influencing my askingprice?

Am I willing to price right and stand firm?

What is my gain by buying up in the present market?

Are the benefits of moving important enough to pricemy home at the market?

ricingYour Home

To Sell

P

A Homeowner’s Guide toSelling a Home for the MostMoney in the Shortest Time

by David S. Knox, CSP

A declining market can be an excellent time to make a moveup to a higher priced home. In this example, the owners ofHome “A” have experienced a 10% decline in value. Byitself, this seems like a negative outcome. Had the ownersof Home “A” sold at the peak of the market, they wouldhave also purchased Home “B” at the peak of the market.The difference would have been $80,000. When the tide ofthe market goes down, the prices of all homes go with it.Home “B” also experienced a decline, but by a greateramount. The difference is now only $72,000. By taking the“loss” in the sale of Home “A”, they realize a net gain of$8,000 in the overall transaction.

Time

Services & Marketing Plan?

Indicated Market Price?

A Real Estate Agent has nocontrol over the market,only the marketing plan.

Never select a Real Estate Agentbased on price.

Select a Real Estate Agent based on criteria specificto the company, the competence of the person, andthe services provided. Never base your choice onprice. A Real Estate Agent has no control over yourlocal market conditions. It would be wiser to selecta Real Estate Agent first, then discuss price. Don’tencourage or allow agents to “bid up” the price toget your listing. True professionals will give youcandid feedback and factual information so you canprice within the market.

14 3© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

Buying Up in a Down Market Selecting a Real Estate Agent

Real Estate Agents find homes by price range using theMultiple Listing Service (MLS) computer. If you price yourhome above its value range, it won’t appear on the printout.Then the right buyers won’t see your home.

RESRES

123456789

1011121314151617181920

StatusActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActiveActive

Address5208 70th St W5837 St. Johns Avenue6013 Birchcrest Drive6937 Cornelia Ave5524 Warwick Place3901 Grimes Ln6421 Mildred Ave5321 INTERLACHEN BLVD6021 ABBOTT AVE S6240 PEACEDALE AVE6817 Southdale Road4217 SCOTT TERR6329 ST JOHNS AVENUE5241 RICHWOOD DR6200 Code Ave S4809 SCHOOL ROAD5616 BERNARD PLACE6233 Brookview Ave S7149 VALLEY VIEW RD5309 FORSLIN DR

Area385385385385385385385385385385385385385385385385385385385385

Price$237,000$239,900$239,900$244,900$247,900$249,900$249,900$249,900$249,900$254,900$259,900$264,900$269,888$269,900$299,900$299,900$319,900$334,900$349,900$349,900

DOM331422

123723571118933701459

195615216142

The wrong price attracts the wrong buyersand the right buyers won’t see it.

Use these charts to list the addresses and prices ofhomes for sale and sold in your area. Note the sim-ilarities and differences between your home andthese samples.

12 5© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

“They can always make an offer.” Homes for Sale

MLS Computer PrintoutHomes That Have Sold

Address Price

Address Price

Value

Price

1. CostThe amount actually paid for a property plusany capital improvements made since the pur-chase.

2. PriceThe stated amount an owner is willing to acceptfor a property.

3. ValueThe amount a buyer is willing to pay given acertain set of circumstances.

4. Market ValueThe amount that will bring a sale between awilling buyer and a willing seller. It is based onthe history of similar properties recently sold inthe area.

5. Regression & ProgressionThe effect that surrounding home sizes have onthe value of a subject property. Regression is thedecrease in value when surrounded by smallerhomes, progression is the increase when sur-rounded by larger homes.

6. SubstitutionSubstitution refers to the actual value of anamenity. Value is determined not by the costinvested in a property, but by the value derivedfrom it. In the following example, the homewith the more expensive well is worth no morebecause value is in the water, not the cost ofobtaining it.

1. Over improvementImprovements should be made for enjoyment,not just resale. You cannot add an item to ahome, based on personal taste, use it, thenexpect a buyer to pay the original cost.

2. NeedAn owner’s need for money does not increasethe value of the home.

3. Buying in a higher priced areaValues are location specific. High values in thedestination do not increase the value of theexisting home.

4. Original purchase price highChances are you paid market value. It’s not aprice that was too high, but a market that hasexperienced subsequent change.

5. Lack factual dataBase your opinion of value on recent document-ed sale prices.

6. Bargaining roomBuyers may offer low, but they will do that atANY price. It is easier to negotiate up to fairmarket value than to an inflated price.

7. Move isn’t necessaryEven if the move isn’t urgent, it is important toprice correctly to preserve your marketingopportunities when the move becomes urgent.

10 7© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

Reasons for Overpricing Principles of Evaluation

Value: $250,000 Value:_________?

$9,000 Well

$17,000 Well

Value is determined by what a purchaser getsOUT of a product...Not what an owner has IN it.

$

Months

Months

By the time an overpriced home is finally reducedto the market, it may be too “aged” for buyers tooffer full price. Have you ever asked how long ahome has been on the market? What conclusion doyou draw?

At some percentage over market, no reasonableamount of time will produce a sale. Even whenpriced right at the market, it may require a monthof exposure to sell.

Regression & Progression History of an Overpriced Home

Principle of Substitution

“But we have time.”

Surrounding property values influence the value of your home.

Regression

Progression

8 9© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

$

$

Prices in the real estate market rise and fall overtime. A rising market may “catch” the home and itwill sell (see A). However, in a flat or decliningmarket, pricing is far more critical since the marketwon’t catch the price within a reasonable time (seeB). Consult with your Real Estate Agent to learnthe current market trend when making your pricingdecision.

The majority of prospect activity on a new listingoccurs in the early period of marketing. This hap-pens because Real Estate Agents maintain aninventory of active prospects that have been culti-vated over time. When a home is newly listed, RealEstate Agents arrange for them to see it. Once thisactive group has seen the property, showing activi-ty decreases to only those buyers new to the mar-ket. For this reason it is important that sellers havetheir home in the best condition and at the bestprice at first exposure to the market.

Value Trends in the Market “Couldn’t we try for a couple of weeks?”

6 11© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

Value

Time

A

B

1 2 3 4 5

Weeks

Activity

Expireds: Out of rangeUp to 30% of all homes put on the marketnever sell. The prices at which these homesexpired represent the “out of reach” price. Ifyou price there, then yours will also expire.

For Sale: Upper end of rangeThese are asking prices only. They have notbeen attained in the market. Examine thenumber of days on market and if it has beena long time, the homes are priced too high.

Solds: Lower end of rangeThese are actual sale prices and are your bestevidence on which to base your pricing deci-sion. Assuming the homes are similar toyours, you should be able to attain similarprices. In a rising market these represent thelower end of the range.

EXAMPLE: This illustrates the financial requirementsbased on the purchase of a $275,000 home with 20%down leaving a $220,000 mortgage at 6% interest over

30 years. (Property taxesand insurance were estimat-ed.) Lenders allow borrow-ers to spend approx. 41% oftheir income on a house pay-ment. Dividing the totalpayment of $1,653 by .41qualifying ratio = $4,032 minimum required monthlyincome, or about $48,384per year without any longterm debts.

4 13© David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN55439. 800-822-4221 © David Knox Productions, Inc., 7300 Metro Boulevard, Suite 120, Minneapolis, MN 55439. 800-822-4221

Competitive Market Analysis Buyer Qualifying Requirements

District Address Bedrooms Sq. Ft. PricePrice

Down Payment

Mortgage Amount

Principal & Interest

Taxes

Insurance

PITI

Qualifying Ratio

Income Required

Option 1 Option 2 Option 3

$275,000

$55,000

$220,000

$1,319

$267

$67

$1,653

41%

$4,032

Price

Down Pmt

Mortgage

Princ & Int

Taxes

Insurance

PITI

Qual Ratio

Income