Sunday, May 17, 2020

What's Your Home Worth?

Things will be opening up soon from the kung flu catastrophe, and you may be thinking about selling your house. The time isn't quite here yet as every week I many houses listed for sale and almost as many price reductions. But with or without the blessing of the powers that be, we will be back doing business again. When that time comes, the market will be interesting and it will be to your benefit to be ready... if you want to sell.

When that time does come, you will have some decisions to make. How much are you going to ask? What will you base this price on? How firm will you be on that number? It's part art and part skill with a little intuitive magic thrown in for good measure. There are a few rules to keep in mind when you start figuring.

Four Rules

Rule one – Zillow's Zestimate is not sufficient research.

Rule two – the assessed value is often a percentage of the market value and, again, is nothing you can hang your hat on.

Rule three – the sentimental value of the memories is of no importance to the buyer, unless they are a family member, and in that case, you should probably want to give them a break anyway.

Rule four – As P.J. O'Roarke tells us, “Something is worth what somebody will pay for it. Nothing else, nothing more, nothing less.”

Real-Life Example

This last rule is especially applicable to the, sometimes illogical, world of real estate. I had a small rehabbed house listed for $165,000. I was hoping that it would appraise for something near that amount so my buyer could get financing. I had four buyers at that price. Unfortunately they all had personal issues that made the deal fall through. The guy that actually bought it asked for some closing costs to be rolled into the price. That bumped it up to $179,000 – and that appraised without a problem – at well over $200 a square foot.

Apparently ads on some of the For Sale By Owner sites stay there almost forever. I recently got a response from some fellow who was interested in the property but felt that $195 per square foot was way overpriced for that area and he wanted to talk about it. I wish I could have seen his face when he got my emailed response telling him what the house actually sold for.

I learned a couple of things from this. 1. Among them is that if you make it nice, people will want it. 2. Perhaps I should have asked for more, but my “realistic” side told me not to. 3. The buyer and lender combination will be the final determinant of what they can pay.

Place to Start

Before getting too deep into the pricing of your property, it would be good to contact your mortgage company to get the payoff on your loan. It is not the amount showing as the balance on your monthly statement. The banksters have other fees they tack on if you pay the loan off early so it will probably be a thousand or two more. Just don't cut the numbers too close.

If you have access to county real estate sales records, this would be helpful. Look at what similar houses are selling for in your area, but don't go beyond any major highways or geographic boundaries. They may look the same over there, but there are often factors that impact the price that are not immediately obvious.

How Does Your Property Measure Up?

Look at the condition and features of the property. You may have to account for some problems or imperfections. Several hundred dollars for a property inspection may be a good investment to see how solid your property actually is. If your house is in good shape the report may help you sell it. If it isn't, you need to know what the buyer will see that will impact his buying and pricing thinking. You may even want to take care of some of the problems to make the house more saleable.

If you know what the guy across the street or down the block sold his place for recently it could be a good place to start. But that doesn't mean you should be asking the same for yours. If you had the chance to look at the house when it was for sale think about how similar it is to your place. The same applies to any house in the neighborhood.

Look at pictures of the properties on the market and compare them to yours. Does the other house have a new kitchen and bath, does yours? How about the floors? Check the public records and compare the number of bedrooms and bathrooms as well as the square footage. While most houses on the market have been priced by experienced realtors, they are just as fallible as you or I. The prices are not set in stone. Don't take asking prices too seriously. It is the actual sales price that matters. Remember rule four. Sometimes the asking price is a product of wishful thinking and sometimes the realtor had a bad day or didn't do their homework properly.

Rrice per square foot is another major factor to consider. This is an essential number as two houses may look a lot alike but are priced thousands apart. You may find the one has 300 fewer square feet. Look at the pictures (this is where Zillow and Trulia are helpful). All these factors contribute to the value of a property. Find at least three, preferably four or five comparable properties to arrive a what seems to be a reasonable price for yours. If you are uncomfortable with this or nothing seems to make sense, for several hundred dollars you can get a professional appraisal.

Set Your Price

This is the acid test of your calculation, and here is where Mr. O'Roarke's rule comes into play. If the price is right you should not have a difficult time making the sale. If you are fortunate, you may get several parties interested in it and sell for an even higher price.

If the property does not sell in several weeks while others are selling, be prepared, both mentally and emotionally to lower the price. When other similar houses are selling, but yours is not, it is either something with the property or location, like sitting next to a crematorium or a politician's office or the price is too high. Some people will offer you a low ball price and hope you take it. It's called a low anchor and even if you don't take the original offer, they hope it will set your thinking downward. Unless the place has been on the market for a considerable amount of time, don't fall for their tactic. There is part art, part science, part magic and sometimes just plain luck in pricing a house for best results.

A Word of Caution

These are interesting times and it will take some people a while longer to come out of their stay-at-home shell. Some have been beaten up financially by being locked out of their business or job. Many will come back but don't expect them to rush out the first week to buy your house

Give it a little more time than you would normally expect before you start dropping the price. The confidence of the buying public will determine when they are ready to move. They have been bombarded daily with tales of death and destruction. This has emotionally damaged some people more than others. Be patient, if you can. If there is interest but the buyer hesitates over price, before dropping it too much, offer to throw in something additonal, like a home warranty, or some piece of furniture or an outdoor grill that they admired. It's not always about the numbers.

Good luck! Happy selling!

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