how to price a home
Oh, excuse me, I now see you’re looking for the needle in the haystack. Well, why didn’t you say so? I had no idea you needed another $100,000 out of the sale of your home. Here, wait a minute, let me fix that for you. This is important, I know. You need to net a certain amount of money or you can’t do what you want to do. I get it. Why, we’ll just raise the price by $100,000. Easy peasy. Oh, wait. That won’t work. Because even if we find that foolish buyer: the needle in the haystack who doesn’t know the home prices in your neighborhood, the home won’t appraise.
No appraisal at value = no loan = no buyer.
This means we need to find a cash buyer, and there are fewer of those. Also, the problem with most cash buyers is the fact they tend to be a bit more sophisticated. Not always, mind you, certainly not more so than you, but most of the time. It’s probably how they earned all of that money, you know, by making wise investments and smart decisions based on sound principles. Tell me, do you think a cash buyer will pay $100,000 over market value for your home? Why do you think they would agree to do this?
Now, I know you looked at my CMA. You even acknowledged that it is impossible to get another $100,000 for your home. Yet, I see you still want to accomplish that directive.
Maybe what you need to do is stay put for another year or three? Or, you could rent out the house. Even though I reached into my needle in the haystack files to look for such a buyer, I haven’t been able to find this kind of buyer yet. Nothing but straw. It might take a few more years.
Which makes me totally bummed. My Harry Potter wand is broken. I can’t grant 3 wishes today. Your Magic Eight Ball says better luck next time. You may fare better to polish up your skills at Blackjack than you would hoping to sell your home for more than it is worth. Here is a tip: double down on 10s or better.
Do you know that the National Association of Realtors reports 87% of home buyers used an agent last year to buy a home? Our buyer is very likely to be represented by another agent. That agent will tell the buyer your home is overpriced, and then what can we do? Shoot him? You can’t just shoot people at random anymore, even if it easier to buy a gun than a stick of gum.
Much as I would like to, I also don’t write the rules about Sacramento real estate. We all wish our market was like the Bay Area but it is not. All real estate is local, and our Sacramento market is slowing down. At least you will get the straight story from me, even if it’s not what you want to hear.
Selling a home without an appraisal in Sacramento is not that difficult to do if you identify which homes might qualify for this set of circumstances. You may ask how do you do that? Well, for starters, you hire an experienced Sacramento Realtor who knows how to spot these types of homes. I remember a while back when I shared with a reporter from the Washington Post how I sold a home in Elk Grove without an appraisal and pulled underwater sellers out from under the house by selling over appraised value. I saved them from a short sale.
That reporter asked how does a person go about finding an agent who can do that? I don’t really know. I only know how I do it. I don’t play by the so-called expected rules all of the time, especially when I don’t have to. For example, most agents would run the comparable sales and try to determine a fair market value. If they’re really good agents and they actually pull up photos of the sold comps and compare interiors, upgrades, with the subject property, if they study the landmarks in Google to make sure they’re not analyzing homes on the wrong side of the street, they can produce a value the way an appraiser might do it; that’s one way.
But there are other ways to determine value. Part of selling a home without an appraisal in Sacramento is to determine demand. The way I sold the home in Elk Grove that by all practical standards was an underwater property and pulled those sellers out of short sale status was to figure out how to make that home appeal to an investor. I looked at what was available for sale and figured a 3-bedroom, 2-bath would produce X amount of income, it was in good condition, and I pushed the price to a breakeven cashflow point. It sold to a Bay Area investor for a lot more than it would appraise.
Contrary to popular belief, selling Sacramento real estate is not always about win-win. Nobody says things have to be equal or fair. Everybody has their own agenda. My agenda for my sellers is to get them the highest price. Not necessarily the price the home might appraise at. Selling a home without an appraisal in Sacramento is one way to accomplish that goal.
A buyer asked me the other day about buying a home. He asked too many questions, which made me think he had so many objections, he might pull out of an escrow. I explained our seller’s market, low inventory, high demand, multiple offers. Yet, he offered less than list price, knowing others would probably offer more, hoping, I suppose, we’d get only one cash offer instead of more than than one cash offer. I have that ability to figure out what a buyer will pay and market to those kinds of buyers.
I asked his agent why the buyer did not do what I told him he needed to do to buy the house. Her response was she didn’t think it would appraise at the amount we were asking. Why, she’ll have me know that she’s been an appraiser in a previous life. So, they offered a fair price. A market price.
I ask you, what does any of that have to do with the price of tea in China? Market price is what a seller is willing to sell at and what a buyer is willing to pay. It’s not appraised value.
People see how fast an agent can put a home pending (into escrow) in Sacramento and they often make the mistake of thinking that selling Sacramento real estate must be a piece of cake, when little is further from the truth. I’ve been working on this listing for the past 6 1/2 weeks. There were a lot of moving parts, many circumstances and unforeseen situations, some out-of-state, some in the city, and it all had to come together. On top of this, I revised my comparative market analysis almost daily to arrive at the perfect listing price.
The listing price is not the selling price. The listing price is the value at which it would make sense to buy quickly and would attract buyers to tour the home. It has to be “just right” like Goldilocks. In our present Sacramento real estate market, it means to put a home pending quickly, the price can be overtly aggressive and it’s OK. Not out of whack.
To keep the peace among many people living in one house and to offer maximum exposure to potential buyers, we elected to set up showings on Friday night from 6 PM to 7 PM and during an open house on Sunday from 2 to 4 PM. The home went on the market Friday morning. I heard there were almost 100 buyers though the home Friday evening. Another 50 or so came by on Sunday. That’s how high our demand. We asked every potential buyer to please submit an offer by 6 PM on Sunday.
The results of showings and efforts to put this home pending
Some agents called to ask if they could show the home next week.
Although the listing expressly stated no FHA or VA, agents still called to ask if their buyer could get an FHA loan.
Another agent begged for a fast reply on Friday, threatening to buy something else on Saturday if his offer was not accepted. Hey, go buy that other nonexistent house. Be our guest.
An agent submitted a contingent offer at list price, as if either wasn’t bad enough.
Quite a few agents submitted at list price, even when informed we had multiple offers.
One guy texted me over and over to ask if he had to submit an offer by 6 PM, to explain to him precisely what I meant by that. Did I mean to say 6 PM? Or was it really 6 PM?
An agent who wanted to send a lowball but I told him not to then whined that we were not allowing him to meet his 40% profit margin. I suggested perhaps his inherent difficulty was his not being able to hire cheap labor and buy wholesale materials, but he was hellbent on complaining that his inability to meet my seller’s terms was somehow our fault.
One agent showed the property on Friday and got around to submitting her lowball offer after we put the home pending in MLS on Monday.
But interestingly enough, some agents were right on the money. They removed all contingencies upfront and provided proof of funds for cash offers. They offered to close quickly, giving the occupants a free rent-back to the end of May. I worked through dinner last night to put this together. And let me tell you, my efforts earned every penny.
If you want to sell a home in Sacramento, please call Elizabeth Weintraub and put 43 years of experience to work for you at 916.233.6759. I maximize profit potential.
Because I list and sell so many homes in the Elk Grove area, I get a lot of calls from appraisers asking about home pricing strategies and what happened during our offer negotiations. It’s a good thing I am organized. I keep all of my offers and notes on each in a separate spreadsheet just for reference. There is no way I can pull this stuff out of my memory. I’m lucky if I can recall the name of the street. The calls from appraisers generally center on how to substantiate the sales value without enough comps.
This is a serious issue, not only with homes in Elk Grove but throughout the Sacramento Valley. I am constantly suggesting to appraisers that they look at the big picture. At the end of the summer in 2005 we had more than 10,000 homes for sale. Today, about 1,600. Huge difference. To add insult to injury, we have more than 1,700 pending, which means if we didn’t take any new listings we would sell everything in Sacramento County in about 25 days. Home pricing strategies are important, but demand outstrips strategy.
One of my clients in West Sacramento who is getting ready to put her home on the market called yesterday to chat. She wanted to know if we should employ home pricing strategies suggested by an agent at an open house. I told her to stop talking to open house agents. Most of them are buyer’s agents, not listing agents. But I also realize open houses are a religious experience in California. The guy suggested she price her home about 1% below market value.
Hello? 2012 is calling and they want your Obama bobblehead back. That was a good pricing strategy 5 years ago but not today. If you price a home below market, you won’t get as high of a price as you will if you price it at market or slightly above. Buyers for the most part don’t know how much homes cost. They see only what other sellers are asking and base their opinions of value on that. The frenzied demand accelerates those expectations. Prices are going up.
Out of all the home pricing strategies available, the best for this particular market is to be slightly ahead of the curve. Because buyers will pay a fair price plus extra if your home is desirable and the price is reasonable. You don’t have to play games with the pricing or try to be sly. Go to market value, and consider pushing it a hair. The worst thing that could happen is a buyer won’t bridge the gap and the appraisal will come in lower. But buyers will offer more.
If you’re planning to sell a home in Sacramento, call Elizabeth Weintraub at 916.233.6759. Put more than 40 years of experience to work for you.
Sellers sometimes wonder if their Sacramento home is priced right. Even though a Sacramento Realtor may explain how comparable sales work, how we arrive at pricing, it’s not unusual for sellers to be confused or to disregard the comparable sales. After all, if a buyer pays cash, the comparable sales are not always that important since there will be no appraisal. Believe it or not, not every buyer is concerned as long as the price pencils out or otherwise makes sense to them, especially if the buyers are from the Bay Area, like many of my buyers seem to be. They think our prices in Sacramento are remarkably affordable compared to the Bay Area, and they are.
You might wonder how a person could shrug off the comparable sales and proclaim they don’t matter, but then you are probably not in Sacramento real estate and you don’t deal with those sellers from another planet. I’ve had sellers scream that they did not care what the numbers showed, they wanted a certain price and if they could not get that price, then they weren’t interested in selling. Fine, I’ll go to the next amusement park ride and stand in line.
As a standard of practice, I always try to pass on all showing activity results during my listing period to the sellers. This can result in sellers getting very excited when they hear that a lot of buyers have showed up on a doorstep. They need a perspective. Following is how I explain the situation when a seller asks if all the action we’ve been receiving on showing a home means we should raise the price, because the seller now wonders if the Sacramento home is priced right. Normal reaction.
- If we receive 5 offers all over list price, then your home is priced too low.
- If we receive one offer less than list price and one offer at list price, then your Sacramento home is priced right.
- If we receive no offers after 3 weeks of showings, your home is priced too high (or something else is wrong)
In other words, it’s pretty much impossible in a seller’s market to price a home too low because the market itself will dictate the price. It’s finding that sweet spot, that place in pricing strategy that will generate a purchase offer. If it’s working, don’t mess with it. If you want assurance that your Sacramento home is priced right, call Elizabeth Weintraub at 916.233.6759. I’ll be happy to list your home and sell it at top dollar for you. It’s what I do.