This brings us to the 3 Rules of Real Estate. Location, condition and price. The latter is determined buy market conditions. Market conditions are related to interest rates, number of units on the market, consumer sentiment, a rising or falling economy, etc. Marco and micro economic factors are all at play, and it is important to use all of these when pricing your property.
Location, location, location was the mantra of years past. Properties near water and population centers always carry a premium. In the 21st Century, condition of the property can have a significant effect on the price, despite an ideal location. The more ideal your address, the more interest and traffic you will generate. Scarcity pushes prices in an upward direction, which is why homes with views of the ballpark or staircases to the beach are so expensive. That said, your location is the first part of the price/value equation.
The condition of your property is the second major factor in our pricing equation. Is your home original, but well kept? How about any upgrades or remodeling? A home that has enjoyed a “to the studs” remodel will get top dollar over an all original home. You can have that epic spot, but if you have decades worth of termite damage you aren’t sitting as pretty as you thought.
Now to the meat and potatos:
- Velocity: Supply in the market-high or low?
- Location: What is the pricing trend in your neighborhood/area?
- Condition: How does the livability/condition of your home compare to those around it?
- i=teardown: minimum possible value, cost of land minus removal/disposal of structure.
- Outstanding: maximum possible value, full remodel or even rebuild, nicest home in the area.
- Price: what the market will pay for your home in the current condition.
Let’s give an example: you have a tract home in a desirable area that was built over 20 years ago, in original condition. The home is totally functional and livable; however the fixtures, appliances, counters and finishes are dated. When you look at comparables that have sold recently, one home has sold for almost 10% more than the others. A quick investigation shows that the kitchen and bathrooms have been updated with top of the line fixtures, appliances, counters and flooring. New hardwood floors and vinyl windows have been installed as well. The backyard also features extensive hard-scaping that your property lacks. What position are you in?
Can you ask the same price as the renovated home? Not if you want to sell. If you were to upgrade and update your property similar to the highest sold, you would need to spend $60,000 to remodel. Do you spend the money (enduring months of remodeling) to get a higher sales price? Or do you sell at a discount and let the new owner decide how to proceed?
For the fastest sale, it would be better to price the home as-is. You will appear as a diamond in the rough at a great price. As opposed to: chasing the high end and languishing on the market with unrealistic expectations.
We at 1850 Realty are happy to share information about the home selling process. Transactions can vary individually, and we are here to help you with your real estate needs. To discuss in more detail, don’t hesitate to contact us:
Next article in this series: Home Inspections.