I recently listed a house where the Seller’s had interviewed 10 agents. When I talked to them, one of the frustrations that they had was when it came to pricing, all of the agents showed up with a print out of the solds in the area and an average price solely based off of that information. Their comment to me was ~I can do that on my own using www.Zillow.com. Hmmm. It’s a rare but interesting moment when you get to truly see how your service is perceived in the eyes of the consumer.
I let them know that I actually use several different methods to evaluate price on a property and then start to look for patterns. Here are the tools that I used which ultimately won me the listing:
~ First is what I call the appraisers method. I take the sold properties that I think are most comparable to the property that I am pricing and start making adjustments. The first thing I do is a square footage adjustment of $100 per square foot. Then I start adding and subtracting money for upgrades, lot size, view, etc. Anything that you feel would affect the price positively or negatively.
~ Second is an average price per square foot of that immediate neighborhood. In this case I don’t worry about how comparable the houses are in terms of size, but I am looking for a close in grouping of the same builder, age, etc to see what the average price per square foot is and how it calculates out on this house. Note: price per square foot does not work well if you are comparing view properties with non view properties since that can have a significant impact on the price. Make sure you are using properties with similar views.
~ Third is to find the ratio of sales price to tax assessed value. Granted the tax assessed value is rarely the same as the sales price, but I find that there is a pattern in the ratios. Take the average of this pattern and apply it to your house. * When you are doing this, make sure that you are using the same tax year for all of the properties.
~ Fourth is to determine the radius that you think a Buyer would search around your house and determine the price per square foot for the entire area so that you know how competitive your property is with those in the immediate neighborhood as well as others that Buyers might be looking at.
In the case of the clients that I mentioned in the beginning of this post, all four methods produced a fairly tight range that we were able to take the average of. Interestingly enough, my price was in line with what all of the other agents had give them. What was different was the way I went about it and articulated it to the client. How you deliver and support your information is important. Try these methods on your next listing appointment and see how they work for you.