As Realtors, we are so often asked “Where did that price come from?” or “Who set that list price?” Most people have a pretty instant opinion about whether, from their point of view, a list price is higher than they expected it to be, or is lower than they had hoped (if they are soon planning to sell a property that is similar). This is an excellent question. Pricing, unfortunately, is not a science, but an art. We don’t set the price on our listings. But we combine thorough research with our experience to recommend a suggested list price to the Seller, so they can make an informed decision of the price they choose. Here is our process:
First of all, we view the property. We can’t just throw a price out there based on a description and address – there is a great deal of work involved to do this correctly. After all, we are trying to assist the Seller in achieving the highest possible amount of money, in a reasonable amount of time. Reasonable amount of time varies in each different segment of the market. We research the Days On Market (DOM) in the area the subject property is located in. In Kingston, in general, it is typical in most segments of the market, to receive an offer within 30-60 days or less. So, if a property has not received an offer within 60 days, or in the typical DOM for that segment, we can conclude that the ‘Market’ is not in agreement with the price. The ‘Market’ is the current batch of buyers presently actively seeking to acquire a similar property in this time frame.
After establishing the average DOM for the area in the last 12 months, we then research the previous sales to find out what homes most similar have sold for, in the last 6-12 months. These are important because they tell us what the recent ‘Market’ has been willing to pay for a similar property. These are often referred to as ‘comps’ or ‘comparables’. Some sellers tell us there are no ‘comps’ for their home, because their home is not like any others that have sold recently, and have many distinct features, and this is very often true. But we have to choose some comparable properties, based on some similar features to get us started, such as location, number of bedrooms and bathrooms, age, size of home or property, updates, condition, and special features (pool, waterfront, outbuildings, etc). Comps are guidelines. We look at their DOM, whether the properties were listed previously and expired without selling, and how many times the price was reduced before it finally sold. If there were not many recent sales in the last 12 months, we may need to go further back in the history. History of actual recent sales is the most important information we can provide to a seller – it is real information about the amount that people have been willing to pay for a property that has similarities to theirs (in size, location, features, etc).
We also look at the competition – what other properties are being offered for sale at the same time in the vicinity, and how long have they been on the market? Has the listing expired after 90 days and been relaunched? How many times has the property been reduced?
We also look at the general market conditions – is it summer when the market tends to be slower, or is it spring, when the market is hot!? Is DOM typically longer than average at this time of year? Are there other general economic factors that may be slowing down the current market?
With all of this information in hand to show the Seller, along with our extensive knowledge and experience in pricing properties, we make a recommendation for a list price range we believe is most accurate to allow a timely sale, for the highest possible sale price. Of course, the motivation of the Seller will assist them in choosing a price. Have they made an offer on another property that they want to secure, or are they transferring to another city, so they need to sell quickly? They might choose the lower end of the price range. If they are not in a hurry to sell, they may choose the higher end of the price range. In future articles, we will discuss the dangers of overpricing, and why some agents may recommend different pricing strategies.
Do you have questions about pricing, and are you considering selling this year? Be in touch and we will set up a time to chat by phone, and perhaps to meet in the near future. A preliminary, no obligation appointment can be invaluable to you, because we also can assist you in seeing your property from a Buyer’s point of view, and make recommendations of any ‘tweaks’ or changes that will bring you the top price and make you most competitive when you list. In this way you know where to invest time and money, if any, in maximizing the value of your home when you sell it.