Monitor other homes currently available for sale
Stay on top of what other properties are for sale in your market. Market conditions can change frequently. You may not want to suddenly become the most expensive home in the neighborhood – or more expensive than another home that's very similar to yours. We suggest checking other homes' prices weekly and taking a day to visit other ‘for sale' properties at least once per month. You should also visit your competition before you list your home for sale.Click here for your free guide!
More ammunition for negotiations
Understanding the market and knowing what else is for sale can provide you (or your agent) with strong negotiating points. You (or your agent) should thoroughly understand how your home compares to others, and know all critical information about the other homes for sale in your area (price, square footage, beds, baths, features, condition).When a client sold their last home, they first made a competitive matrix of all of the homes for sale in the area. They noted address, price and a list of attributes of each home. They also noted how long each home had been on the market. They updated the list weekly.
This ‘competitor list' not only helped keep the asking price correct with the market, but also provided a wealth of insight to help the seller negotiate with the person who bought their house. Knowing how your house stacks up against the competition will affect not only the final sales price, but can also influence the inspection process (see Step 19). Because of their thorough market knowledge, the seller was able to get more money and do less repair work when they sold their house.
You can also use the competition in your favor in your advertising efforts. Without ‘naming names', note in your flyers the features or qualities of your home that are missing in the homes of your competitors. Because, like it or not, this is a competition. The other people in your area who are selling a home are your competitors. You can be passive, and lose money; or, you can be active and knowledgeable, and exploit your competitors' weaknesses to your advantage. All it takes is a little effort on your part.
Price adjustments
Watching the prices of other homes helps you understand better when or if you should make price adjustments. Bear in mind, you don't need to lower the price of your home just because someone else lowered their asking price.Factors such as the number of homes on the market, the quality and condition of the available housing inventory and even the time of year can all influence home prices.
If you need to sell quickly, you may want to consider lowering your asking price to match overall market conditions. Otherwise, watch and react to the market. The condition and features of your house versus those of your competition should dictate your price point. Review this sample competitor matrix:
| Subject | 123 Elm St. | 456 Oak St. | 789 Pine Dr. | 555 Walnut Ave. | |
| Price | $299,900 | $324,900 | $288,900 | $306,900 | $315,000 |
| Days on market (DOM) | 21 | 40 | 114 | 29 | 81 |
| Square footage (SF) | 2,550 | 2,800 | 2,480 | 2,550 | 2,600 |
| Price/SF | $117.61 | $116.04 | $116.49 | $120.35 | $121.15 |
| Bedrooms | 3 | 4 | 3 | 3 | 3 |
| Baths | 2.5 | 3 | 2.5 | 2.5 | 3 |
| Basement | Y | Y | Crawl space | Y | Y |
| Basement-% finished | Unfinished | 95% | None | Unfinished | 50% |
| Garage spaces | 3 | 3 | 2 | 2 | 3 |
| Lot size (SF) | 10812 | 9817 | 6750 | 8800 | 8450 |
| Features | Air conditioning | Air conditioning | No air conditioning | No air conditioning | Air conditioning |
| Hardwood floors | Attic fan | Needs updating | Hardwood floors | Good condition | |
| Partially remodeled | New kitchen | New carpet | New kitchen | 1st floor study | |
| - new master bath | Great landscaping | New carpet | |||
| - new appliances | Recently remodeled | ||||
| throughout |
How does my house compare to other homes for sale?
In the example above, how does your house (the "Subject" property in the table) compare to the others?What do you know from the above chart? Your house has been on the market for about three weeks. All of the others have been on the market for longer than that. Square footage of all of the homes is similar. All of the homes have 3-4 bedrooms. Four of the five homes have a basement. The two highest-priced homes have partial or fully-finished basements.
The subject seems to be priced well. It has many of the features of the higher-priced homes (3-car garage, air conditioning) but also has a larger lot and has been recently remodeled.
If all of these homes were similar (in similar locations, etc.), someone would probably buy your home over 456 Oak Street because yours has a 3-car garage vs. a 2-car garage on Oak Street. Also, your house has 70 more square feet, has a basement and a much larger lot – easily worth the $11,000 price difference.
In this example, your house also looks better than 789 Pine Drive or 555 Walnut. Both of those homes are priced higher. Yours has a 3-car garage vs. 789 Pine's 2-car. Your home is the same model as 789 Pine, but that home has a smaller lot and no air conditioning. Any buyer will have to decide between space and lot size (yours) vs. new finish (789 Pine). 555 Walnut is even more expensive, with similar finish and square footage to the subject, but adding a partially-finished basement. A finished basement may be worth $15,000 (the premium to your house in the above example), but that house will ‘feel' more expensive, and will also be out of reach for anyone who is qualified to buy a house up to $300,000.
The most serious competition might be from 123 Elm Street. Sure, it is $25,000 more, but it has more square footage, one more bedroom, a fully-finished basement, a lot nearly as large as your home and a new kitchen. The buyer in the $300 - $350K range might find 123 Elm more appealing due to its larger size.
How do people search for homes online?
Deciding how to price your house (or change its price) requires a basic understanding of how buyers search for homes. First of all, people, including real estate agents, tend to search for homes using fixed pricing ‘zones'. Simply put, someone will search with a price parameter of $250,000 - $300,000; or $325,000 - $375,000. Rarely does anyone search with a range such as $302,000-$321,000.Don't price your home in a weird price range! It makes absolutely no sense to price your home at $277,000, even if that's what an appraisal or the "average price per square foot" numbers in a particular neighborhood are telling you. In that case, either lower the price to $274,900 or round up to $300,000 (best choice) and see what happens. From $300K, you can let the buyer 'beat you up' on the price down to $285K - they'll think they are getting a great deal and you'll be laughing all the way to the bank because you made $8K more than you expected! Also, at an even $300K, you'll catch people searching from $250K - $300K, as well as people searching from $300K - $350K.
In the chart above, 789 Pine Drive and 555 Walnut Avenue are at "odd" price points at $306,900 and $315,000. The home at $306,900 is losing out on buyers who may be searching up to $300,000. This owner might sell more quickly with a price of $299,900 (or $300K even). 555 Walnut may be competing with homes at $325,000 and may even be able to sell at $325,000.
Depending on the market and the competitors in your market, try to price your home at the end of one of the ‘standard' ranges - $149,900; $299,900; $224,900. Pricing your home at $205,000 just doesn't make any sense - lower it to $199,900 and catch all the people searching up to $200K.
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