If someone were to take a survey of home sellers, I am sure that two of their chief concerns would be "how to get the highest price for my house" and "how to sell my house quickly." After being in real estate in Southern California for over 33 years, I have seen many home sellers and home buyers grapple with these issues. In the first of this two-part article I'd like share some of my thoughts on getting the highest price for your home. In the second part, I'll discuss strategies on how to sell your home in the fastest possible time.
HOW TO GET THE HIGHEST PRICE FOR MY HOUSE
Want to sell your home and receive the highest price possible? Is there a secret to arriving at exactly the right price? The secret is: there is no secret - only research and hard work.
Some sellers price their home based on their own purchase price. They expect to receive appreciation for each year they occupied the property, say 3%, 5% or 10% per year, plus their original investment.
Others price their home based on need. If they plan to build a new home, they take into account the cash they need to complete their construction costs plus a little extra. Still others may need money for college costs, or medical bills.
No matter what the seller's needs are, it is important to understand how the final price for your house will be determined.
The "SALE" Price Versus the "ASKING" Price
If you own a home and plan to sell, you may be surprised to learn that buyers set the final sale price. Does that mean you must sell to the first prospect at whatever price is offered? Not at all.
Actually, it is the home owners who set the "asking" price. This may be a figure pulled from thin air or the result of logical thinking applied to extensive facts and figures. Whatever the source, this price signals the sellers' price expectations.
The greatest hazard associated with pricing a home too high is that buyers will not even make an offer. If no purchase offers are received, no sale will take place. In other words, until buyer and seller agree on a price, nothing happens.
Why, then, is it that the buyer sets the final sale price? Consider the negotiating process. The seller sets an asking price. The buyer makes an offer at a lower price. The seller rejects the low offer, and makes a counter-offer at a higher price. The buyer rejects the counter-offer, and submits one of his/her own. Eventually the buyer makes an offer acceptable to the sellers.
Until the buyer offers enough, no sale takes place, and there is no final sale price. Thus, it is the buyer who determines the final price.
The "NET" Price Versus the "GROSS" Price
If you could conjure up the ideal home sale, it would probably be to sell your home at full price, for cash, with closing in a week. If that happened, and your price was US Dollar 250,000, how much money would you "net"?
There is a difference, of course, between "gross" and "net" selling prices. If you sell for US Dollar 250,000, your "gross" would be the full amount - US Dollar 250,000. The "net" is an entirely different story. Here's why.
Anytime you sell a home, even for cash, you will have at least a small amount of closing costs - assume 6% of the selling price. That cost, along with potentially other costs, will have to be deducted from the "gross" price to determine your "net". The process of converting "gross" to "net" becomes increasingly more complex when you factor in expenses related to the type financing secured by the buyers.
Sometimes a low buyer offer may result in a higher "net" sale price to the sellers. For example: let's assume you received two offers at the same time for your house.
Let's compare them: The first buyer meets your price of US Dollar 250,000; but, the second buyer offers only US Dollar 242,000. Both buyers plan to put %5 down on the house and closing close will be about 6% of the sale price.
The first buyer plans to secure a new mortgage loan for thirty years. The lender will be charging three "points" in order to give the buyer the lowest possible interest rate. The buyer's offer asks that you (the seller) pay the three discount points (about US Dollar 7,100), and 1/2 the closing costs (about US Dollar 7,500 or US Dollar 15,000 divided by 2).
The first buyer's offer of full price - US Dollar 250,000, although it looks good will cost the seller an additional US Dollar 14,600.
The second buyer's offer of US Dollar 242,000 is US Dollar 8,000 less than the asking price and the amount offered by the first buyer. However, because they plan to secure a 15 year loan, with no discount points, and plan to pay their own closing costs, you - the seller will "net" US Dollar 6,600 more from the second buyer than from the first buyer (US Dollar 14,600 - US Dollar 8,000).
Therefore, when considering offers to purchase your home, do the math, check the net proceeds in detail. You may be pleasantly surprised.
Know the Competition
When selling a home, the most difficult assignment for owners is pricing their home at "fair market value". Because homes rarely sell for more than a fair price, it is critical that home owners do sufficient research to make their pricing decision.
How can they gather the data needed for their decision? Gather information on recent sales in your area. Sale prices, terms offered, and time on the market are all pertinent.
Once the information is gathered and put into perspective, what becomes evident is a price range in which the seller's home will likely be sold. By comparing the size, features and amenities of similar homes, it is possible to estimate the probable sale price of your home.
Two factors are not readily apparent, however, from those hard facts and figures. Those factors are buyer appeal and condition. Since the comparable homes are already sold, it is not possible to visit them to determine how and why buyers were impressed enough to buy them.
Homes currently for sale which are competing for buyers are another story. To home owners planning to sell, these homes are the competition, and they deserve close scrutiny.
One way sellers can check out the competition is by driving through nearby neighborhoods to identify homes currently for sale. Taking notes for comparison later is a good idea too. What style are the homes? How are they maintained? Do they make a positive impression?
Sellers may also ask their agent to explain the asking prices and condition of those homes - again for comparison.
Sellers who arm themselves with an in-depth understanding of the local market before pricing their home will be in a better position to arrive at a selling price that represents fair market value. The benefit can be an early sale at the best price.
Bob Newsom, Real Estate Broker, 33 years in southern California real estate, trained thousands of real estate agents, developer of hotels, condominiums and single family homes, founded on-line real estate business that generates over 2.6 million hits per year, www.MLSprintouts.com and www.HomeSearches.com. Bob can be reached Bob@HomeSearches.com.
Added on: Nov 30, 2007 |
