Pricing your property properly is a critical step in getting it sold in a timely manner. Typically, except for some extremely unique homes or lots, if a property is well marketed and an offer is not received within the first two to three weeks, it is over-priced. The longer a property is on the market, the more likely it is that it will sell for a higher percentage under the original listing price. So, it is important to price a property properly from the start. Please see the chart on The Effects of Over Pricing.
The five factors that are the most essential to consider in pricing a property are:
1) Comparable Sales – Both appraisers and buyers will immediately look to see what similar houses have sold for in the past six months in this neighborhood for comparison. Properties that are currently on the market are also relevant to the extent that they have not yet sold at a particular price, especially if they have been on the market for awhile.
2) Location – If a property is in a more desirable location, e.g. a large flat lot, walking distance to schools, in a desirable school district, easy access to freeways , shopping or near job centers, the more likely that it will demand a higher price, as compared with other properties nearby that may not have as ideal of a location.
3) Physical attributes – The physical attributes of a house, including the number of bedrooms, the size of the house and lot, how it is laid out, common space, kitchens, bathrooms, yard, etc. will also help determine price as compared with other houses nearby that may have different attributes.
4) Condition – If the house needs a lot of work or updating it will not be able to sell for as much as a house that is updated, clean and in good repair. The cost of repairs and upgrades need to be considered in the cost of the house. When reviewing the comparables, it is important to compare the condition of properties that may otherwise have similar attributes or location.
5) Demand/Competition – If a property is “unique”, e.g . a hillside lot, an extremely large or small house, or difficult access, there may not be as much demand for this property as compared with other properties with similar attributes or condition. Additionally, if there a many houses with similar attributions, location and condition for sale at the same time, and there is not enough demand for them, the lower priced houses may sell more quickly. This may be true in areas where there are a number of foreclosures or distressed properties on the market at a low price.