My House Is The Same As My Neighbor’s!

THE BACKDROP

Undoubtedly, one of the most important tasks a listing agent performs is the determination of the “probable selling price” of their seller’s home. Sellers mean well and I appreciate the fact many have done their homework and have somewhat of an idea as to what the listing price should be for their home. In fact, I will often ask the seller prior to coming out to their home to conduct the formal listing presentation, the listing price they’d like to set for their home. Why did they pick that price? Many times, their reason is “my house is the same as my neighbor’s house” and it sold for X amount.

HETEROGENOUS REAL ESTATE

The seller’s house may have been built at the same time as their neighbor’s, may have the exact same floor plan, identical upgrades & amenities, similar lot size, etc, etc.
However, real estate is heterogenous – no two properties are exactly alike. Each property is unique and therefore, even though two properties appear similar, one may have more value than the other based on where in the neighborhood the house is located. We call this situs value.

SITUS VALUE

This is critical for the home seller to understand so they price their home appropriately. During the listing presentation I make sure to fully explain situs value as it pertains to properties that are comparable to the seller’s home.
During a recent listing presentation to a seller whose home was on the market for six months and left the market unsold (aka expired), the situs value explanation opened the seller’s eyes as to why the home didn’t sell.
Two of the comparable properties were located on the golf course and one of the two was down the street from the tennis courts. Yet the seller’s property was priced the same as those two properties. The seller’s home was overpriced by more than $30,000 and not only did it not sell, they had received zero offers.
We’re confident with the new price, the home will sell and the sellers can comfortably “turn a new page” in their lives.

Cmon’, Big Money!

You’d think you’d hear the above mantra at a casino craps table rather than at a listing meeting prior to marketing a seller’s home. “C’mon Big Money, Big Money, let’s go, $450,000! (dice fly in the air)”. Well I’ve got some news for you, listing at that price when the probable selling price is $45,000 less, is, more or less, gambling. And you’re going to lose in more ways than one.

First of all, if you truly want to sell, it will take you a long, long time. You see, the $405,000 buyer you NEED to buy your home will be turned away by the $450,000 list price. They will not even show up to see your home! Why would a $405,000 home buyer want to see a home that is priced 10% over what they can afford? Not going to happen. So, the actual buyer who can afford your home is being eliminated from the potential buyer pool.

Secondly, the $450,000 buyer that sees your home will be disgusted. Disgusted because they’ve seen what $450,000 can buy them, and guess what, your house comes up way too short. Essentially, they’ve compared your home to other $450,000 homes feature by feature, and they immediately conclude that your home is significantly overpriced. And they are buyers! Can you imagine what a knowledgeable real estate professional will say? Not only that, but that real estate agent will not bring another $450,000 buyer to that home. So, the buyer you believe you’re attracting, will also be slowly eliminated from the buyer pool.

So, over the course of several weeks, you’ll begin to notice that nobody is coming to see your home: neither $405,000 buyers nor $450,000 buyers. Make sense? Your buyer pool has been reduced to a slow trickle if not completely dried up.

If you still need to sell, guess what happens at this point? Price reduction(s). Maybe more than one price reduction. How many price reductions will it take to get to the actual legitimate sales price? That’s up to you. Do you actually KNOW what the probable selling price of your home should be? Your agent should have run a comparative market analysis to determine the probable selling price of your home. And if they did, why didn’t you heed their advice? Never mind. I know why.

You see, many homeowners have such strong emotional ties to their homes and believe these “feelings” somehow contribute to the overall value of their home. Sorry, but the real estate market doesn’t care that you’ve spent 20 years raising your family there and that you have too many memorable moments to let the home go at $405,000. It doesn’t work that way.

How do I know? Well, in short, I’m a full-time professional real estate consultant and it’s my job to be an expert on my local market. I’ve done my homework, I’ve selected similar properties for comparison, I’ve run the numbers, I’ve made the appropriate monetary adjustments, I’ve assigned calculated weights to the adjusted prices, and finally, I’ve come up with a probable selling price for your home. The current market dictates the probable selling price of your home, I just utilize current market data to calculate that price and communicate that to you. In affect, I’m just a messenger. In reality, since I get paid on a percentage of the sales price, don’t you think I’d prefer the highest price possible just as you would? You betcha’.

In closing, if you truly must sell your home, why gamble? Select a real estate professional that knows the local market, can run the numbers for you and pinpoint the probable selling price of your home. Based on this probable selling price, both you and the real estate professional can agree on the listing price for your home.