Pricing your home correctly is one of the most important factors when selling your property. Many sellers think that in a robust, sellers’ market, as we are in right now, that they can list their home above market value and thus at a higher price and therefore make more money on the sale. Unfortunately, this is not always the case. I thought I’d take this opportunity to delve into property pricing, the impact unrealistic pricing has on both agents and sellers, as how using real world benchmarks is key in pricing.
The Price is Right
Several factors come into play when determining what to list your property at and a good agent will sit down with you and ask numerous questions directly related to your overall goal in selling your property.
Some people may need to sell quicker than others. They may have decided to purchase a new home and need to free up their funds in their current home to close on their new home. Others may need to sell due to a job relocation and others may have personal reasons such as a divorce or needing more space sooner rather than later for a growing family.
On the other hand, many people may not need to sell as quickly. In this instance, it may be a second home or investment property. They could be looking to downsize as their kids have gone off to university or they could just want something new but aren’t in any rush to sell and thus purchase. Additionally, they might simply just want to be taking advantage of the current market and realizing a good return from when they originally purchased the property.
These are two very different situations with very different goals. The timeline in which you are looking to sell will impact the price your property is listed for, but it may not be the most important factor in setting a price. If you want to sell quickly it would benefit you to list your property at a price that is at or slightly below our recommended price. If you have time to sell you may want to list at the top end of our recommended price, but not too far above. It’s key to remember that the price needs to be right.
What Determines List Price
Several factors are considered when determining what to list your property at. The first is the competitive marketplace specific to your area down to your neighbourhood and even your street.
This is what we call “comps”. This is easily pulled from our CIREBA database which every CIREBA agent has access to. This will give us a good starting point but it’s only the first step in many that I believe should impact a list price.
The second consideration which greatly impacts pricing is what I’d like to call real world benchmarks. It’s important to work with an experienced real estate agent that can look beyond what the “comps” say, someone who has an extensive knowledge of your neighbourhood and has probably been in and in many cases sold your neighbour’s property.
As no two homes are alike every little detail of your property is taken into consideration such as the fixtures and furnishings, the landscaping, upkeep of the home as well as the view, size of lot and availability of other similar properties on the market, among a host of other factors.
For example, the house across the street may have sold for $2 million just a month ago so you may automatically think your home should sell for the same. But maybe that home had more canal frontage, a built-in dock or high-end luxury furnishings, all of which impact the value of the home.
The third factor which is key is having a true understanding of what is most likely to happen in the near future and no I’m not psychic! As with every industry, the real estate industry relies heavily on trends. Right now, on a global basis, we are in a booming real estate market but that could change. With more than 30 years of experience in the Cayman real estate market, I’ve seen both ups and downs.
It’s important to be able to utilize those years of experience especially when it comes to pricing. For example, interest rates are going up, which will have a direct correlation on mortgage rates. Right now, those rate increases don’t seem like a lot at .25% but you need to look forward, see that inflation is not going anywhere soon and that governments are most likely to raise interest rates several times throughout this year.
Using this example, this alone could impact the price we list your property at especially depending on how soon you may want to sell.
More Money More Problems
Personally, I have lost the odd listing to another agent as a direct result of pricing. In today’s market, as they always have done, sellers are looking to make as much money on their property sale as possible. In some cases, sellers are not taking the advice as recommended and simply pulling a number out of the sky as they feel that the market will accept anything. Another aspect is that agents will list high just to get the listing in the first place.
This, of course, is not unexpected and completely understandable. But what I am finding is that if one agent won’t list a property at what the seller wants to sell it for, they may go to another agent who will.
The reality is there can be many numerous negative impacts of pricing your property too high and being too optimistic on pricing can have an impact on getting buyers to the table.
If your property is priced too high, it won’t sell regardless of how amazing the property is. When that happens, you will need to adjust the price down and/or make compromises when you do get an offer. Maybe someone is willing to make an offer but at a lower price, but they also want several conditions met during closing such as expensive repair work. This can create more problems for you in selling your home. If your home is priced too high, when an offer does eventually come in, you may need to compromise to get the sale done.
Price reductions within the real estate industry are not unheard of, but I feel should be avoided as much as possible. Unfortunately, price reductions can have a negative impact on how buyers may view your home asking questions like what’s wrong with it if it’s been reduced especially in a sellers’ market or why hasn’t it already sold. Both create questions that must be responded to and justified if you can.
The overall goal with pricing is to price it where the property is the most attractive to the marketplace and where it brings more buyers to the table than would normally be expected as the market can see the value in that property. What this does is put you in the best position to have multiple parties that have an interest in the property with the hope of creating excitement and ultimately a bidding war so that you, the owner, are able to get the best terms and price for your property.
Being too high scares some buyers and being too low will get too many buyers and leaving money on the table. Some sellers will go with the agent who will list their property at the sellers’ recommendation and within a few months they are reducing the price and ultimately selling at a lower price than necessary if the property had been priced right at the beginning. So, there is some finesse to this.
No agent can beat the market. They are not going to persuade a buyer to do something just because they want them to. The market environment will dictate how much someone is willing to pay for a specific property.
The best time to sell your property is at the first time you present it. That is why it is so important to have all the marketing associated with the property complete when it is first listed including professional photos and virtual tours. When a property goes live it’s the first time the market is seeing your property and it is key to make a great first impression.
The Secret Sauce
Determining a listing price for any property is what I’d like to call a mix of art, science, history, and experience. It is a multi-faceted process that doesn’t happen lightly or immediately. It is one of the most important processes that I, as an agent, will go through when working with a seller providing them with a comprehensive opinion on how best to move forward taking into our account their specific goals and needs. In fact, it’s one of the aspects of being an agent I enjoy the most.
So, if you are looking to sell, I recommend working with a truly experienced agent. Someone who will sit with you and work with you as a partner not just someone who will say yes just to get your listing.