When listing your home for sale you want to make sure you are getting the best advice from the agents you interview regarding an asking price and a likely sales price. Some say that Realtor’s “bully” this point over and over and there are blog posts all over the nation drumming home the point. Buyers market, sellers market, or in between market, pricing is critical to finding a buyer.
It’s been said over and over, but I’ll say it one more time.
- If you don’t get many showings once listed – you’re likely over-priced.
- If you get showings but no offers – you’re likely over-priced.
It’s important your Realtor knows market times for your part of Barrington so you’ll have an idea of what to expect. If you are far beyond the average, well then “Barrington, we have a problem!” Even if you are lucky enough to elicit an offer, you may both be too far apart to reach agreement and your buyer will walk. No amount of sales pitching on the part of your Realtor is going to persuade either a buyers agent or their clients to go beyond what they feel it is worth.
Establishing Home Prices
Every real estate market is different, so this post really only addresses homes in the Barrington area. As a country suburban community our real estate is much different than some of our neighbors. It’s completely different than other states. The laws of supply and demand can mean shorter or longer marketing times in each area, faster price increases or decreases, luxury markets are different to first time buyer markets, and so on.
Every Realtor should use comparable sales to establish a marketing range for a property and an anticipated sales value. None of it is exact, it’s not a science and our homes are the exact opposite to cookie cutter homes. To find comparable sales we should look in the same village, neighborhood if possible or within a mile if possible. Then it’s a matter of find like aged, sized, accommodation and lot size in the properties. All of which usually means we don’t find very good comparable’s. Adjustments often need to be made to compensate for differences.
Here are some poor comparisons:
- A 50 year old property should not be compared to one of 10 years old.
- South Barrington should not be compared to Barrington Hills.
- A sale of over 6 months is highly irrelevant, beyond 12 months, should not be used.
We must attempt to find the best in similarity. Example: I cannot add a $$ number to an age difference in property because I am not a licensed appraiser, but I can tell a home seller that they cannot expect the same sale price as a home 40 years younger.
In reality there are usually enough home sales to select 3 to compare with. If there are too many differences, I’ll reject that one and look for another. More on home pricing in general can be found online.
How To Ratify Your Asking Price
It’s not uncommon for Realtors to select different properties to use but ask your self when shown them, how similar are they really? If they are off target and you follow the wrong path you’ll be overpriced and suffer the consequences. Or if they are close but you choose to pump your price up by 10% to 15%, again you’ll suffer the consequences.
So how can you or your Realtor ratify your asking price in Barrington to make sure you’re not way off the mark? It’s actually kind of simple. When a buyer applies for a mortgage an appraisal is done. That appraiser must use at least two methods to establish value. They use similar homes and cost to re-build methods. As Realtors we can do a more simplistic method by comparing square footage values. It doesn’t need to be made more complex than it is.
Take 3 sales and an asking price. Each property is on similar acreage so I first deduct the same amount for the land value. Then I establish via the listing information and the tax records what the above grade square footage is. (Basements completely ignored – I just ensured they all had one).
Here were the results of three I recently used. $217, $219, $227 per square foot. That’s a pretty close range given that each house will have different upgrades. Certainly it’s good enough to use $220 per square foot as my benchmark. Now enter the for sale property and using the same rules it comes in at $278 per square foot. This supports my advice to buyers that it is over priced. That’s a huge difference!
No matter which way I present it to the buyers, even with emotions and love, they won’t buy a home over priced to that degree. There’s an argument that it could be of much better construction and recently upgraded throughout, but I had already selected the best 3 similar homes to start with. I can allow a slightly higher number, maybe $230 or even $240 if it appears to be the best but we are still $38 per square foot apart.
Important – I am only using this as a benchmark – most often when I see a difference in home prices that are not making sense to me. After all my buyers must rely on me to advise them on pricing.
Corinne – Why Was There Such A Big Difference?
Curious minds need to know, right? There had to be a reason for the disparity so what was it? Simply the square footage was much higher in the homes that had sold compared to the one for sale. They were all similar to each other but not to the active listing. I felt very confident in this case about my pricing and the buyers agreed with me.