Determining a property's value is very complex as most of us do not live in a planned development in which everything is pretty much “like in kind.” Many homeowners review online real estate websites and see property valuations as a possible value for their own home, but those may not be reliable. Here’s an example:
A few years ago I listed a home located on a highly trafficked street and two houses away from a major freeway. The online valuations suggested the home was worth between $750,000 and 800,000 because some homes within an immediate radius sold in the $800K range. However, what these online tools could not factor in was the property’s condition and needed repairs, or that this home was on a busy street or the close freeway proximity – all items that can greatly affect a property’s value. This listing garnered tons of interest, but in the end only two offers came in and the highest offer was $685,000. When I called all of the agents who showed the home but did not write offers, they all cited the street and freeway noise as concerns. Luckily I had prepared my clients for a realistic selling price based on all factors, but if I were to solely look at price per square foot and not analyze the challenges and assets I would have done them a massive disservice. In general, I find that the majority of homeowners have high expectations when it comes to what they think their home is worth, but sellers never set the price, the buyers do.
The other day I worked on a CMA, which is a “comparable market analysis,” for a homeowner considering selling. When looking at the recent sales in his area, I saw two homes that sold within the same block just 3 months apart: one home sold for $960,000 and the other sold for $1,240,000, and both were the exact same square footage. That is a difference of $262 per square foot. Both homes were vacant and staged but one was in better condition, had higher quality upgrades, designer touches and more mature landscaping. This is a good illustration of buyers responding well to homes with thoughtful improvements.
Here are three considerations for sellers:
The price you want to sell your house for does not matter to buyers. And there is no talking a buyer into buying your house, or paying you what you want. Buyers set the sale prices, so before you start preparing your home for the market, consult with your Realtor and look at the sold data. Work with an agent who will take a deep dive into the data, who knows your neighborhood, who will compare and contrast your property with the recently sold homes in the area and tell you what you need to know, not what you want to hear.
Pricing a home too high may dampen your success. In our marketplace, many buyers stop their search often between 10–40% under their budget as they are keenly aware of all of the multiple offers over the asking price. (FYI, I have been coaching my buyers for years to search at least 20% under their maximum.) Let's say a buyer has a budget of $2,000,000… they may stop their search at $1,600,000. If you put your home on the market at $1,750,000 they may never view, consider or offer on your home. Additionally it is the multiple offers that give sellers leverage as this is a blind bidding process. Another example of this is that many buyer's agents will check in multiple times, asking the listing agent how many other agents may write an offer. A listing agent has to answer honestly as ethics and integrity are crucial. If your home is priced too high often you receive fewer offers.
The homes that tend to sell at the highest prices have been meticulously prepared: often sellers are paying for painting, floor refinishing, landscaping, new light fixtures, professional staging, etc... I am seeing many sellers spend between $25,000–$50,000+ to prepare their homes. I know you may be scratching your head, but often when we live in a home we get used to some of the imperfections but buyers are paying a great deal of money to buy in the East Bay and they are not so forgiving. The homes that I see more multiple offer situations on and sell for the highest prices are squeaky clean and are positioned so a buyer can just move right in. This does not mean that a buyer is not taking on repair recommendations, but cosmetically a buyer can move in and feel good about it. Proper home preparation is crucial for buyer appeal. If you have equity in your home and are short on funds, Red Oak now offers our Enhance Program which allows homeowners to use our team of professionals to improve your property for up to $60,000 and pay for it when you close escrow.
As I sign off, I want to thank you for the trust and enjoy your summer!
