Editor’s Note: The Playbook is a RISMedia bi-weekly segment centering on what brokers and agents are doing to ensure they not only survive but thrive in these challenging times. Industry professionals explain the strategies they’re employing and unique ideas they’ve formulated. Tune in every other Thursday for another addition to the series.
Determining the correct listing price for a home is more challenging now than possibly ever before. That’s because 2023 follows a year when the residential real estate market experienced exhilarating highs and numbing lows. Due to rapidly rising mortgage interest rates, the same house in Anytown, USA, might have sold in days for way above list in April, only to sit for weeks with little or no real buyer interest in November.
So now, as the spring selling season approaches, how best to devise and recommend a price for sellers? There are several tried-and-true strategies that still work…to a point. They include location, determining the condition of the house and comparable recent home sales to formulate a listing price. What’s tricky is countering new sellers who will likely opine about what they think their house is worth. Because what it was last year is not what it is this year.
“All sellers (and buyers) need to adjust as the market shifts,” says Judy Zeder, a REALTOR® with the Jills Zeder Group I Coldwell Banker, Miami, Florida. “What is critically important is that real estate professionals make sure they are current in all activities in the areas they work. They need to study properties coming onto the market, prices that properties are trading at currently (through pendings) and the history of closings. In a fast-paced market, the data may be old in 30 days.”
Another pricing-point consideration is where exactly the house to be sold is located. Markets differ from state to state, town to town and even block to block. Some areas haven’t skipped a beat, even with the higher mortgage rates.
“We’re in Miami, so there hasn’t been a huge price correction,” notes Minor Ruiz, a real estate professional with Realty ONE Group, Royal Oaks | Miami Lakes, Florida. “We keep getting foreign buyers, plus we have people running away from many of the blue states because of taxes and new corporation laws. The buying or selling client is usually never ready, so we have to explain the process and make them feel positive about their purchase or sale. The more the client is informed, the more comfortable they will feel, and they will trust you for life.”
A similar situation is playing out in New Jersey for Debbie Lang, a REALTOR® in the Princeton office of Berkshire Hathaway HomeServices Fox & Roach, REALTORS®.
“My experience so far this year is that it is a lot like the beginning of 2022, with a very serious lack of inventory and bidding wars,” she says. “There are more buyers than there are sellers. People are still waiving appraisals and asking for minimum inspections. Houses are selling over list if the home is in excellent condition and in the right town and location. If there are homeowners thinking about selling, now would be the time to capitalize on the prices that have reached their peak.”
Interestingly, a hot market in one state has helped REALTORS® in another.
“Real estate is hyperlocal, so home sellers’ demands will vary tremendously in each market,” explains Jerry Pinkas of Jerry Pinkas Real Estate Experts, a brokerage in Myrtle Beach, South Carolina. “Myrtle Beach is experiencing a lot of activity, with many Floridians relocating to the area due to a variety of factors, including reasonable home prices, oceanfront properties and mild weather. Due to the active market, sellers have been able to demand all-cash offers and pre-approved buyers. I am seeing many properties under contract within 48-72 hours, regardless of the still-high mortgage rates.”
Alyssa Brody, co-founder of Development Marketing Team, a data-driven real estate sales and marketing brokerage in New York City, says prices in the Big Apple have mostly held firm.
“Activity here has slowed in recent months, causing sellers to price their homes competitively,” she admits. “That said, New York City real estate is notoriously competitive, and that continues to be the case in the current market. I have seen many sellers requesting no-contingency offers, mortgage pre-approval and short escrows in order to get their homes sold quickly, and I anticipate this continuing into the year.”
High mortgage rates slowing down activity
Nevertheless, in many parts of the country, things are not quite as rosy. Mortgage rates are back up close to 7%, double what they were in the first half of 2022. Many people who might have considered selling are staying put until the rates drop, as they usually want to buy something else before they sell. Plus, there is often a mental obstacle of accepting that their homes will not realize the price they easily could have at the same time last year.
With pickier clients, Zeder says owners need to make their homes as attractive as possible, meaning catering to the whims of potential buyers.
“Paying close attention to what the consumer is interested in is important,” she notes. “Since in many places buyers have more choices due to the change in the market, sellers need to be in tune with what they like and what they are willing to pay for when they buy.
“For example, many buyers want the option of a home office or room for exercise equipment. Staging a home to show the possibilities helps a buyer decide to bid on one home over another. I have been fortunate to have had a very long career in real estate and have seen many changing markets. I find that both buyers and sellers have great opportunities in these types of markets with good guidance and counsel.”
Getting back to computing the perfect listing price, the comparative market analysis (CMA) is standard fare. But what happens when the seller says they want at least what their neighbor’s house sold for last year? That’s when there needs to be a very specific and logical explanation of why this year isn’t last year. Plus, the mortgage lender’s appraisal could be problematic if they don’t agree that the house is worth what’s being asked.
Amanda Peterson, a REALTOR® with RE/MAX Advantage in Nashville, Tennessee, explains that buyers understand price realities once they are schooled on market specifics.
“House-listing prices this year in Nashville are relatively close to where they capped off at this time last year,” she says. “Most home sellers are becoming increasingly more understanding of the market change. While typically they come in wanting higher prices (who doesn’t, right?), when presented with the data, they understand that pricing correctly is of the essence.
“Though there was a decline in sales in the latter part of last year, the spring market is already showing steady signs of increased activity. We’re seeing multiple offers again on highly desired locations. While there is an uptick in showings and offers, both buyers and sellers are accepting of a lot more negotiation, and both sides are often compromising on certain terms. Sellers are offering home warranties more often and sometimes other concessions as well. At this time, sellers are demanding agents with solid skills and market knowledge, as the market shift has led to a greater need for strong negotiating skills and accurate pricing.”
Of course it’s the seller’s rodeo, so if they want to start with a high listing price, that’s their choice. If the house languishes on the market, there will need to be the sometimes uncomfortable discussion about a price reduction, sometimes more than one. It will be up to you if you feel it’s worth your time and marketing costs to see through what could be a lengthy process, with the real potential of no sale at all.
What works best most of the time is giving sellers a range of prices to choose from. If they want to sell fast, for example, list it lower and expect multiple bids. If there is time, list it for a reasonable but not overly high price. Every house and every owner is unique. It’s the expertise of the REALTOR® that will decide the right listing price and get it sold.
Key takeaways:
- To formulate the right listing price, REALTORS® need to study properties coming onto the market, prices that properties are trading at currently, and the history of closings.
- In slower market areas, sellers need to make their homes as attractive as possible, meaning catering to the whims of potential buyers.
- When a potential seller says they want at least what their neighbor’s house sold for last year, there needs to be a very specific and logical explanation of why this year isn’t last year.
- If an overpriced house languishes on the market, which is usually the case, there will need to be the sometimes difficult discussion about a price reduction.
