If you keep up with current events, you surely know the unsustainable market driving Brooklyn home sales is slowing down. As a result, it is more important than ever to properly assess the initial offering price of your home before the first buyer walks through the door.
The days of throwing a price on a property and expecting a gazillion offers and selling over that asking price are coming to a close. However, that does not mean that houses still aren’t selling. On the contrary, homes that are in good condition and properly priced are selling.
What has contributed to the shift in Brooklyn home sales?
There are many reasons. It could be that most buyers have already bought. Some buyers may have changed their desired area to a suburban setting due to working from home. Finally, we are experiencing rising interest rates and a potential recession.
Regardless of the slowdown, sellers need to be aware that the market is changing. Supply and demand dynamics are changing. As a result, buyers will experience less competition in a slowing market.
Finding the right price to offer your home is crucial and will take some research.
Homeowners often view listing their homes at a higher price as a way to negotiate a lower price if a buyer makes an offer. But unfortunately, this belief can backfire on a seller.
Statistics show that when a seller overprices a home for their current market, they will end up selling the home for less than they would if they had initially offered the house at the correct price. So you have to decide if that is a risk you are willing to take.
When you overprice a property, you are excluding potential buyers. Buyers are looking for their desired price range and usually search in $5,000 increments. Therefore, the buyer pool narrows when you price your home over the reasonable value.
You must contend with the home appraisal if you are lucky to find a buyer willing to pay a price over reasonable market value. A home appraisal is an opinion of value based on the most recent sales within a certain proximity of your home.
Correctly pricing a home is a fine art.
Having worked as a real estate professional, I have learned a seller can either “price to sell” or “price to keep.” Simply put, if you are not realistic about your pricing, you must prepare for the possibility of your home not selling.
Five Considerations When Pricing Your Home
There are five factors to consider when you begin to price your home. An experienced real estate agent can help you through this process to come up with your pricing plan. Your home will get the most attention in the first two weeks after hitting the MLS. You want your price to entice buyers.
Your neighborhood and where your home sits within that neighborhood are important. School districts, crime rates, walkability, and accessibility to public transportation and shopping are important. Your location within the community can be affected by being on a busy street or next to a noisy public amenity.
Appraisal guidelines include finding comparable homes within a ½ mile radius of your home. Homes sold within that radius must be considered first if they are equivalent. The appraiser can go outside that radius if they do not find the required comparable properties.
Location is not something you can change or improve when selling your home. However, if your location is less than ideal, you must adjust the price.
Comparable Home Sales
The next consideration is the recent home sales. As stated above, there is a radius that the appraiser must stay in when evaluating a home’s value. Recent Brooklyn home sales reveal what a buyer is willing to pay for a specific type of home.
The comparable homes should be similar to your home but do not have to be identical.
An important point to remember is that not only is the appraiser looking at this information, but so is the buyer when determining an offer on your home. A buyer does not want to overpay.
It may be obvious that an updated home in excellent condition will sell better than a home with a 1970s kitchen. But, at the same time, a knowledgeable buyer knows that a kitchen update could cost them between $40,000 to $60,000.
Properly preparing your home for sale is essential. Check out this previous blog post on increasing the value of your home.
A well-maintained home will always be preferable to a buyer. If your home has significant issues, you will need to price accordingly. If you know of repairs but don’t want to make them, you will need to adjust your price.
Selling “as is” has pros and cons that you should discuss with your real estate agent.
An appraiser will also evaluate the condition and compare it to the sold homes he is using to determine a fair market value of your home.
Improvements and Updates
You should consider significant improvements to your home when determining your price. Although, don’t expect you will get a dollar-for-dollar return on that investment. Remodeling Inc. publishes an annual Cost Vs. Value report by region may help you understand the return on the value of an improvement.
Specific projects offer a higher return than others, as seen in this report. You can not simply add the cost of improvements to the price you paid to determine an asking price.
There are three types of markets: a Buyer’s market, a Seller’s market, and a Neutral market. The kind of market will give you information about the market conditions.
For example, we are coming out of a Seller’s market. In this market, there was insufficient inventory to meet the number of buyers ready to purchase a home. As a result, the supply of available homes was low, increasing the competition between buyers to win the bid.
As the inventory of homes increases, we enter a neutral market where the supply and demand are balanced.
A buyer’s market is when more homes are available for sale than buyers are ready to purchase.
The area that you live in may also affect the market conditions. Markets vary geographically across the country.
Keep these tips in mind when you are deciding on a price for your home:
Understand Pricing Search Criteria
Buyers search for homes in price ranges, usually in $5,000 increments. So, for instance, if their maximum price is $350,000, and you price your home at $352,000 they may never find your home in their search.
Watch The Local Market
Look out for the homes on the market near you, especially those considered your most significant competition. Are they going under contract quickly? Are prices reduced? Try to stay ahead of the market.
Implement the “99” strategy.
In real estate and just about every business, there is a psychological element to pricing at $399,000 versus $400,000. So, for example, buying in the 300’s feels better than the 400’s, even though it is only a $1,000 difference.
Hire a real estate professional.
A real estate professional monitors the current real estate market and offers valuable advice when the market shifts. An experienced agent has probably maneuvered through the three types of markets and can guide you to a successful sale.
The Price Is Right
You will know the price is right based on a few facts:
Initial Buyer Interest
If you receive requests for showings in the first week of the listing, you are probably priced right.
Comparable Homes Are Priced Similarly
If the competing homes are similar in square footage, condition and price, you are probably priced right.
Offers Received Within The Average Market Time
The average market time will vary depending on the market conditions. If you receive an offer within that expected market time, you are probably priced right.
As I said earlier, pricing a home correctly is a fine art. Not only do you have to consider the current market conditions, but you also have to consider future conditions. Pricing ahead of the market would be easy if we had a crystal ball. But unfortunately, pricing is affected not only locally but also nationally by our economy.
Two common mistakes that affect Brooklyn home sales are overpricing your home and emotional attachment. As I said before, overpricing is a risk. However, pricing your home correctly is essential to a successful sale as the market shifts. Also, I find most home sellers emotionally attached to their homes. That is understandable, but you can not let your emotions cloud the facts.
Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering selling your home. As a Brooklyn real estate agent with over 35 years of experience, I understand the intricacies of pricing a home to sell! Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].