Understanding Home Values: Episode Eight- Pricing Your Home
How you price your home matters. In this video, I discuss the pros and cons of a few different home pricing strategies and give practical advice on how to choose your home’s list price.
Hey y’all, Zach McDonald, your real estate agent with Real Property Associates, and I’m going to add a video to our Understanding Home Value Series. In this video, we’re going to talk about pricing your home. As a seller, there are a few different pricing strategies that you can go about during the selling process, and I wanna discuss those more in-depth here in this video.
The first pricing strategy that I typically talk with clients about is pricing your house above the market. And let me rewind really quick before I get too far into this, the three, and I’ll just start with the three, you can either price your house above the market value, you can price it at the market value, or you can price it below the market value.
So, without further ado, let’s continue on with our conversation. The above the market value approach is an approach that’s more commonly used in a slower real estate market and/or by somebody who really is dead set on a specific price, maybe despite the fact that it might not quite be worth that much, that’s what they wanna get out of it.
In a slower real estate market, homes don’t sell as quickly, and you might be 30, 60, 90, 120 days on the market. In the Seattle real estate market we haven’t seen that at least recently homes have been selling in a week, maybe two. The market in the Seattle area as of now has slowed down a little bit, and we’re seeing more homes on the market in 30 days, in 45 days. But that’s still a relatively quick amount of time.
This price above the market strategy, though, is helpful in setting an anchor price. Maybe the seller is, or you as the seller, are willing to accept less, but ideally, somebody would pay your top dollar price. In the home valuation process, as we look at comparable sales, which we talked about in the previous video, and we look at the market conditions, and we look at what homes are selling for and how quickly they’re selling, this is a strategy that we can use. It’s not very common, though, in a hotter real estate market, more of a seller’s market.
Now, the pricing at the market value strategy is the most common, and I’ve said previously that there’s not really a dollar amount that a house is worth, there’s really more of a value range. If you think of a range, let’s use 700,000 as an example, maybe the house is worth somewhere between 650,000 and 700,000. In looking at comparable sales, maybe we dial it in a little bit closer and we say somewhere between 650 and 665 is where we’d wanna be on the price.
Anywhere in that range would be in that market value range, 650 to 665. If we were to say 675, now we’re above the market. And if we were to say below that 650, we would consider that below the market value.
So this above the market value is something that we could shoot for, but you are running the risk of having no buyers coming to look at your house. And over time they’ll start to think, “What’s wrong with this house?” I know when I have buyers like, “Why has this house been on the market for so long?” The first answer is usually that it’s overpriced. The other answer is then, maybe there are issues with the house.
So those are the things that buyers start to think, “Well, nobody else is willing to pay this much, why would I be willing to pay this much?” And then, “Oh, what are some of those hidden conditions that might be present?” There are some risks with pricing your house too high.
This market value range is a little bit more of a timeless way to price a house, because in a hot market you’re still where buyers are gonna see the value in your house, and it’s gonna sell relatively quickly. But in a slower market, you still have that same reaction. It might still take time to sell in a slower market, but if your house is priced at the market value, buyers are going to see the value and your house will sell quicker than that house priced above the market value.
In a slower market, you’ll probably end up near that price, a lot closer than if you were priced above the market. You’ll probably end up closer to your asking price, and if it’s a competitive market you might actually get a little bit of a bump on the price. So maybe you have multiple people willing to pay the market value, and now you’re actually getting above the market value for your house, which is what we were seeing a lot in the Seattle area.
I, generally speaking, always recommend this at the market value price unless, like I said, you’re in a super slow market. That’s when you would maybe consider that above market price. Or, you have a very special house.
Maybe it’s unique and there aren’t any comparables, or it’s custom-designed, or maybe it’s in a really nice neighborhood and it’s a huge house. Like I said, there’s no way to really compare it accurately with some of these others. If you’re a lakefront house, or you’re in a super desirable neighborhood, that’s where you see more of that pushing the price strategy, and I would highly recommend it.
Now, pricing below the market is another option, and you see this a lot of times with fixer uppers or with maybe a hot market, and you have sellers that wanna see, “Okay, what kind of a bidding frenzy can we stir up? Can we get five, 10, 15, 20 people that are interested in buying this house? Let’s just see what happens.”
The last few years in Seattle have been like that. You’ve seen a lot more pricing at the market value, but on the lower side, and some even going far below what you would think the house is worth. And so you have a whole bunch of buyers like, “Man, I’d love to get the house for that price.” But it ends up selling for at or above the market value anyway. But in a slower market, that’s not the best strategy, because you’d essentially be giving your house away, and you’re not going to have that competition.
Now … Let me rewind that a little bit. It might be advantageous to be just on the low side of the market value in a slower market because you’re still gonna be getting essentially the value of your house, but there might be the potential of, if you need to sell quicker, being able to sell quicker. Or maybe getting that little bit of … Maybe you do get a couple buyers.
There are certain houses that are going to sell in any market, and the price is important, but it might not be as important for some of those houses. You can probably picture that house, it’s the perfect house that’s everybody’s dream house, at least within their price point.
But a lot of houses, there are things that aren’t that desirable about them, or maybe the location isn’t as desirable, or there are things in the house that aren’t as desirable about it. In that situation, this pricing really does matter. So for the majority of houses, it really does matter this pricing discussion. Are we gonna be above the market value, are we gonna be at the market value, or are we gonna be slightly below market value?
As a real estate agent, I would highly recommend being at that market value. No matter what kind of a real estate market it is, that’s gonna be your … bread and butter spot.
Now, being on the higher side of the market value or being on the lower side of the market value, those are both valid strategies within that market value strategy, but I wouldn’t recommend pricing below or above in very many situations.
Again, there are certain situations where you would go ahead and price above the market, and there are certain strategies and situations where you would price below. But, generally speaking, it’s best to land in that market value zone.
This is going to be the last video in this Understanding Home Value Series. I hope that it was helpful in putting all of the pieces together, going from, “What’s my house worth” to, “Okay, now we’re gonna actually sell it, how do we price it? What is somebody willing to pay for it?” This is gonna be your framework for understanding this is how we figure out what somebody’s willing to pay for your house.
Again, Zach McDonald, your real estate agent here in Seattle. And if you do have any questions about your home’s value, or you’re thinking about maybe selling your home, I’d love to be a resource for you and help in any way that I can. Bye for now.