McClelland Minute - September 27, 2009

Pricing for Success

One of the most important decisions a seller will make when preparing to list their property is pricing it competitively within the local market.  To do so requires accurate information on prices at which comparable houses are being listed and sold.  Only by completing such an analysis can you be certain about what your home is truly worth.

Before making a recommendation to you, a Realtor will review all the homes in the marketplace that are similar to the one you are selling – starting with recent sales, those that have sales pending, active listings, and maybe even the ones that have expired.  Activity in each of these categories will contribute to the overall analysis, but some have more relevance to the discussion than others.

The most important step is to compare “apples to apples” – square footage, design, age, condition, garage / no garage / size of garage, basement development, landscaping, and of course location.  Sold properties with similar characteristics are the most reliable evidence of worth; the transaction has closed, and the property transferred.  In other words, the sellers actually have the cash in hand from a willing and discerning buyer.  The proof of value is strong.

Pending sales on the other hand are those where the buyer has secured the property for an undisclosed price, but ownership has yet to transfer.  Things can still happen to derail the transaction – denial of financing, failure to pass inspection, and sometimes a sale collapses simply because the buyer or seller just changes their mind.  I have seen relationships break down in the days prior to taking possession, individuals unexpectedly lose their jobs, plus any number of other reasons you can file under “it happens”.

Every seller’s eyes will wander first to the highest asking price of active seemingly comparable listings.  We are all proud of our home and the competitive instinct often kicks in; along with the bragging rights that we will have about topping the market.  Take a harder look at how long those high rollers have been on market, and then compare it to the homes that actually sold.  Often the story is told right there.   Pricing high is a trap, particularly in a market where there is a lot of inventory for buyers to choose from. 

Expired listings are the best examples of properties that likely haven’t been priced appropriately.  They may be very good homes in excellent locations, but at the end of the day, buyers passed them by.  Why?  Often it was because they were seen as over priced for the current market.  If you really want to sell, your asking price has to be on target.  If it isn’t, keep adjusting it until you start attracting buyers to your home.

One final consideration.  An experienced Realtor will have a gut feel about the right price that can’t be explained only by comparable properties.  We are in hundreds of homes every year; some just plain feel better than others.  This is the “art” as to the “science” of real estate.

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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