The Puzzle of Pricing
Sunday, March 30, 2008
Setting the right price for a home can be an angst-ridden process.
So many factors are beyond the seller's control. There are the number of competing homes on the market to consider, the motivations of the sellers who own them and perhaps an uptick in foreclosures that might drag down prices in some areas.
That makes it critical to scope out the competition: homes that are on the market in your neighborhood when you're ready to sell, as well as comparable homes that have recently sold. That's what will determine how much a house sells for, not what you paid or what your neighbor got three years ago.
Traditionally, sellers and real estate agents have used comparable sales dating back six months. But the market is so fluid now that many agents say examining a three-month window is more realistic.
"The value of a home is determined by what else people can buy when they're ready to go shopping," said Jane Fairweather, a Coldwell Banker agent in Bethesda. "Value is a moment in time. It's that simple."
That's what Fairweather had in mind when she suggested that Joe and Sharon Luber list their four-bedroom Colonial in Rockville for just less than $800,000. The couple settled on $799,000.
Fairweather told the Lubers that house hunters tend to group prices in $50,000 increments. She wanted to target the $750,000-to-$800,000 range because going higher probably would have heightened expectations for amenities. In the Lubers' neighborhood, houses in higher price brackets typically have new kitchens or bathrooms. The Lubers' home does not.
"This was a trade-off price range," Fairweather said.
Thirty days later, the Lubers dropped the price by $50,000.
By then, 68 potential buyers had passed through the house and 6,610 had viewed it at Realtor.com. But none had made an offer. Meanwhile, five similarly priced homes had sold in the neighborhood.
"From the feedback we were getting, everyone said: 'The house is beautiful. The curb appeal is great. But your kitchen is tired,' " said Joe Luber, 65, chief financial officer of a law firm. "People come in, and they don't want to lift a finger to do anything themselves. It's tough out there."
Given that another 21 houses in the same price range remained on the market, Fairweather told the Lubers they needed to target buyers in the next lowest price bracket -- $700,000 to $750,000 -- if they wanted to sell swiftly.