HOME PRICING STRATEGIES

There are many smart home pricing strategies, but it all comes down to positioning your home to sell.  After all, that is your goal, correct?


You must know the factors that impact your home’s value and what factors do not.

One of Coldwell Banker’s flyers expresses exactly what most, if not all, agents want to say to their potential sellers when discussing the different home pricing strategies. 

Here is what it says:

Factors that Impact Your Home’s Value:

  • Market Condition (Out of our control) - the current supply (or inventory) of homes for sale, buyer demand, interest rates and availability of financing, prices of recently sold properties, economic factors and seasonal demand
  • Your Home’s Condition - location, age, size of the home and lot, floor plan and architectural style.  I can add current or no upgrades to this.
  • The Competition (what’s on the market now that is comparable to your home) - the number of similar properties for sale and their prices, condition, location and financing terms.


Factors That DO NOT Impact Your Home’s Value:

  1. Original Price - what you paid for your house originally
  2. The amount of proceeds you need - the nest cash proceeds you want or need.  I can add, “how much you own” on this list, but we can argue that it goes hand in hand with how you need to walk away with.
  3. Opinions of  your family, friends and neighbors - what your friends and neighbors say your home is worth.  I’ll also add family to this.  Unless they’re appraisers, their opinions won’t count.

I have to add one more to this list and that is your emotions.

What do I mean?

The Most Important Factor When Considering Home Pricing Strategies

The most damaging factor when considering home pricing strategies is your emotions.

I understand that you have deep emotional attachments to your home. You’ve watched your kids grow up in your home.  You even have all of the kid’s different heights marked on one of the door frames.

You’ve poured sweat and maybe even tears into your home improving or adding a room, a bathroom, etc.

You’ve just installed a new AC system, a new roof and you’ve made sure that your home is in tip-top shape with all of the modern conveniences.

I get it!  The other agents get it!  Most buyers get it!

However, the buyer’s lender do not!

Having top upgrades on your home, depending on the market condition, will get you slightly more money.  However, what it mainly does is help your home sell quicker.

Your home must be priced according to what the market says your home is worth based on facts of surrounding homes that have ACTUALLY  closed, NOT what your neighbor or surrounding homes are on the market for.  

Those homes are our competition.  If they're overpriced and your home is priced right - which home do you think will sell the quickest?

The competition will actually help your home sell for a higher amount.

When Considering Home Pricing Strategies, Have The Buyer's Lender In Mind

Unless the buyer is buying all cash, she will have to have a mortgage loan in order for her to buy your home.

Guess what?

Her lender will not have any emotions involved in the entire process.  They want to make sure their collateral, which is your home, is worth the amount they’re giving the buyer. 

They will determine the value of your home based on market facts, via an appraisal.


Rocket Mortgage and other lenders will always do an appraisal on a home that is a collateral for the loan they're giving the buyer.   The home must be at or greater value than the amount they're lending the buyer.  Keep this in mind when you pricing your home.


If the market says your home is worth $300,000, but you have it listed at $310,000, then either the buyer comes up with the difference (very unlikely) or you have to drop the price to the appraised value.

You and the buyer may determine that she come-up with a little extra money (like $2000) instead of the full $10,000.  If she has it, then you can come down on your agreed upon price to $302,000. 

If the buyer does not have any funds to go up, then you’ll have to come down in price or else the transaction falls through.

Therefore, when considering the proper home pricing strategies, you have to have the buyer’s lender in mind.

So, What Are The Home Pricing Strategies?

I’m sure other agents can come up with other home pricing strategies, but the following are definitely the top 3.  

There are other strategies that will aid in your home selling quickly and the transaction to go smoothly (another article), but they don’t have anything to do with the pricing strategies for your home.


STRATEGY #1:

The first and most important strategy is keeping the buyer’s lender in mind, by doing what an appraiser would do to achieve pricing on your home.  I briefly touched on this above, but we’ll talk more about it here.

We may not be as detailed as the appraiser will be, but we can come close by doing a very detailed CMA or Comparative Market Analysis on your home by looking at comparable properties, also known as “comps.”

We’ll go over the comps on your home by looking at homes that:

  • Have closed in the last 6 months
  • Are currently in the market because they are our competition
  • Just went Pending so we’ll know what made that buyer pick it instead of another home

As well as the age, size, # of beds and baths, condition, pool, how many stories, etc.

We’ll also look at your homes proximity to:

  1. Active train tracks
  2. Airports and fly paths
  3. Powerlines
  4. Major streets and/or highways
  5. High or low rated school districts
  6. Major businesses in the area

Going over these FACTS will give us a much better and realistic picture of the value of your home - one that will be very similar to what the appraiser will come up with, which will eventually make it to the desk of your buyer’s lender.

Another advantage of setting the right price for your home is that it will be The BEST marketing for your home. 

Here is how to make it work for you...


STRATEGY #2:

This second strategy seems completely opposite of what you’re trying to do - make as much money on the sale of your home.  This strategy requires you to price your home lower than market value.  

Yes, you read that correctly - Lower than market value!

How much lower?  One percent lower or at least a half of a percent lower than market value.

What are we trying to accomplish by doing this?

This is one of the home pricing strategies that makes the seller most nervous - for obvious reasons.

However, this strategy works tremendously well, especially when it’s a seller’s market (more buyers than sellers on the market), because it creates an auction effect.  

If you couple this strategy with a home that has had upgrades and is in great condition, you will have many buyers fighting over each other to win your home.

When this occurs, guess what?  You’ll end up with a higher offer than if you priced it at market value, which means more money in your pocket.

You’d like that, right?

I thought so!


STRATEGY #3:

I could argue that there are actually 2 strategies here, but they’re so close that I put them into one category.

I call this strategy, “4’s, 7’s, no 9’s and by 25000 increments.”  

What do I mean by this?

Do people really fall for pricing a home at $349,999 instead of an even $350,000?  Not really, but they’re used to it because everyone seems to be doing it.

It’s not a good strategy, however.  Have you ever noticed the price increments of the search engines?  That’s right!  They are in $25,000 increments.

“So what?” you say!

Will, I say, what if a buyer is looking for a home priced between $350,000 and $500,000 because they know that homes priced below $350,000 are not what they’re looking for.

Guess which home they just missed looking online?

The good thing about pricing it this way is you get both sides of the search.

You’ll get the buyer searching up to $350,000 and the buyer searching for $350,000 and up.

Yay!

Research also shows that it you must price your home in between the $25,000 increments, then pricing it with 4’s and 7’s will have the effect that the 9’s were intended to have.

For example, if your home’s market value is between $305,000 and $315,000, then you should price it at either at $304,700 or $314,700.

Consider the above home pricing strategies.  These are not something I made up.  These are based on doing lots of transactions and representing lots of buyers, which gave me a good insight into their thought processes.

Most of the above are based on my experience and my conversations with my buyers over the many years I’ve sold real estate.

My sellers have benefited as well…  Except for those who wouldn’t listen!



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About the author: All of the articles in this site were written and provided by Rico Castillo (DRE# 01234643) with Coldwell Banker.  If any information is provided by another source, such as the local MLS or by Metrolist, then a disclaimer will be on that page.

Rico can be reached by cell at (916) 934-3146 or email at rico.castillo@cbnorcal.com.   Visit his YouTube Channel at https://bit.ly/3bAaZJs

My aim is always 100% client satisfaction by helping you accomplish your real estate goals and finding you the home you've Dreamed about in the area you and your family can feel proud and safe to live in!