We are going to tackle a number of critical items across several blog posts that cover the broad topic of preparing the home for sale. Today we are digging into how we – real estate broker and seller – will jointly develop a strategy for pricing the home so that it attracts multiple buyers, gets the property sold in the shortest amount time and makes the process as painless as possible.
One of the most common questions we hear early from sellers is: “What’s my house going to sell for?” If fortunate enough to represent you as the listing agent, I would kick off that discussion by first sharing the latest housing data and trends for Seattle/King County and in your specific area to guide you toward a price range on your home. It’s healthy to talk about both the local market and the condition of your home before coming up with a price that’s fair market value. A price range can also show you how certain home improvements now can produce a higher valuation when it’s ready to hit the market.
The second-most-common question from sellers at the start of the process is, quite fairly, “How much money will I get from the sale?” Once we have determined how much more time and effort will be invested in improving the home, we will get into the nitty-gritty and discuss what are your potential net proceeds from the sale after all costs are applied. It’s a great question to ask early and one that a number-cruncher like me can help estimate.
All seller scenarios are unique. Some people are relocating to another state for work and just want rid of the current home. Some need the proceeds from one home’s sale to complete the purchase of another. Whatever the case, it’s important a seller paints a clear and specific picture about those next-home plans to allow his/her broker better understand timelines, potential financing concerns and family matters. The more info the better. (Your agent is obligated to hold those private details in confidence unless they involve unethical or illegal activity. He/she should not share personal details with, say, a buyer’s broker or lender.)
In my conversations with a seller, I will talk a lot about the pool of buyers looking for a new home. The market tends to include what we call a “backlog of buyers” that have been looking for weeks – even months – to find the perfect home. They have seen everything on the market that fits their criteria and know when it’s priced right. Now they see your home hit their search app and want to learn more.
This is why pricing the home correctly at the start is important; it’s fresh and exciting to buyers and their agents. The listing will attract not only new people just starting to look, but it will also pique interest from that backlog of buyers seeking their Seattle dream home.
When the home is priced right, you will attract the largest pool of buyers in the first few weeks on the market – if the home remains on the market that long – as both sets of buyers come calling. The expectation is a wave of interest will generate buzz for the home and even possibly create a fear of missing out (FOMO, anyone?) from buyers who don’t visit your open house (or a broker-coordinated visit for a buyer).
When the home is not priced right, we could find the listing linger on the market for more than a month. Most buyers shop by price range and look for the best value in that range. Overpricing a home prevents the very buyers who are eligible to purchase the home from ever seeing it.
Since you can’t change the location of your home, a seller with an overpriced property will have to either consider doing further improvements, lower the asking price or both. The question then becomes: “What’s my bottom line?” Talk with your broker about your price floor before listing the home to better understand what you should always net from the transaction.
There are some other considerations a seller should think about when preparing to list the home:
- If a buyer submits an all-cash offer, would you be ready to accept it and move out in a shorter-than-normal period, say, 20 days after mutual acceptance? It could be an option but, of course, you can always counter the offer with your own set of timelines.
- Many offers include contingencies, a topic we cover here. What types of conditions will you – the seller – impose and what contingencies from buyers will you want to be on the lookout for? What types of conditions will you – the seller – impose and what contingencies from buyers will you want to be on the lookout for?
- Are you willing to make concessions, such as paying for some of the buyer’s closing costs to complete the transaction? Sellers can help cover those costs – up to 3% for conventional loans, 4% for VA loans (with “funding fees” and some leeway for sellers to cover items such as discount points) and 6% for FHA loans. While uncommon in a frenzied seller’s market, there are times when, for example, current or former members of the U.S. military will receive financial assistance from the seller as a “thank you” for his/her service. The buyer’s mortgage lender can clarify the precise limits.
As a seller, it’s wise to be prepared before the offers arrive to ensure negotiations are kept to a minimum and in your favor. Developing and executing on pricing strategies and scenario-based responses when a buyer approaches with an offer are just two keys to ensuring we have a happy seller.