#realtorWinterPark

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Why You Should Think About Listing Prices Like an Auction’s Reserve Price

For generations, the homebuying process never really changed. The seller would try to estimate the market value of the home and tack on a little extra to give themselves some negotiating room. That figure would become the listing price of the house. Buyers would then try to determine how much less than the full price they could offer and still get the home. The asking price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than the list price. It was unthinkable to pay more than what the seller was asking.

Today is different.

The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more.

According to the Home Buyers and Sellers Generational Trends report just released by the National Association of Realtors (NAR), 45% of buyers paid full price or more.

You may need to change the way you look at the asking price of a home.

In this market, you likely can’t shop for a home with the old-school mentality of refusing to pay full price or more for a house.

Because of the shortage of inventory of houses for sale, many homes are actually being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.

When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. It’s the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.

Bottom Line

Someone who’s more familiar with the housing market of the past than that of today may think offering more for a home than the listing price is foolish. However, frequent and competitive bidding wars are creating an auction-like atmosphere in many real estate transactions. Let’s connect so you have the best advice on how to make a competitive offer on a home in our local market.

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Home Seller Faq’s

When is a good time to sell?

An easy answer is when it is best for you! Obviously, if you are closing on a home purchase, moving for work, or want to get settled before the new school year, you have a timeline you need to work with. But, if you have the luxury of choosing when to sell, there are a few considerations.

Spring is traditionally a time when there are more buyers looking, but for our area that is not the case, properties sell year-round at market prices. Watching the market is always smart. A seller’s market, meaning there are more buyers than sellers, is always a good time to list. As of this posting, we are in a sellers’ market.

What is your home worth?

Determining your home’s market value is one particularly important reason to use a real estate advisor. We will do a Professional Opinion of Value to help you set the correct listing price. We look at recent sales of comparable homes, similar homes that are under contract, and homes that are listed in the same price range of your home. Then we compare features of the homes including the size, style, number of rooms, age of the home, amenities, condition, lot size and placement, and the location or neighborhood. (Note: the tax appraiser’s assessed value of your home has nothing to do with the market price.)

How do you determine the right listing price?

What your home is worth and what you should list it at are not the same. You always want to have room to negotiate with buyers, so setting a “firm” price to avoid the negotiation process is not usually a good strategy. Neither is setting a very high price to “see what we get.” Setting an unreasonably high price usually results in longer time on the market, which does not look good to buyers and will frustrate you.  Many sellers ask about the price that Zillow or other real estate websites give for their home. These are not reliable because these sites are only taking into consideration very general demographics.

How long will it take to sell my home?

The length of time on market will depend upon the market in your area at the time of listing and whether the home is priced realistically. We are always working to get you the highest price in the shortest time possible. On average, a home that is priced right goes under contract in two to three months. If you need to sell fast, that should be reflected in the list price.

What do I need to do to get my home ready to sell?

We recommend that you give the home a thorough cleaning– get rid of anything you aren’t taking with you, declutter surfaces, take care of repairs, make sure the major mechanical systems are in good operation, have the exterior pressure cleaned and the landscaping spruced up. You may also consider repainting if it is overdue or if the home is painted in dark or bold colors.

How will the showing process work?

We will decide together on how to handle showings. We can set parameters as to the hours and days that showings are allowed, and how to notify you in advance. Homes show best when the homeowner is not present, but if this is not possible, we will work together to create the best experience for the buyer that also fits your lifestyle. Usually, we use an electronic lockbox that allows buyers’ agents to access your house key. These boxes also notify us any time they are opened, so no one is accessing your home without my knowledge. If you have pets in the home that need to be tended to during showings, we will work out the best way to handle them. Furthermore, we will try to get feedback from each showing and pass that information back to you.

Should you consider FSBO or a flat fee listing service?

We strongly discourage those routes, not only because we want to help you sell your home, but also because they can be a huge burden and do not get you the best price. Buyers know that when a home is sold FSBO or on a flat fee service, that the seller is paying little or no commissions, so they will offer less. Consider that when you sell your home by yourself, you will have to be present for all showings, and you will not have someone to advocate for you through all the steps of the contract and closing process. If something goes wrong, you will want us in your corner to prevent problems or save the deal, so you do not have to start over.

What marketing will you do to help sell my home?

Hands down, our best marketing tool is the Multiple Listing Service (MLS.) This is the database real estate agents use when searching for properties for buyers. And buyers are using websites like Realtor.com, which is why all my listings automatically show up on these websites. Our broker will list your home on our company website, and we may also use additional avenues such as open houses, brokers’ opens, and direct mailing, depending on your home and market.

Should you offer incentives like a home warranty, closing costs, or selling agent bonus?

Incentives are something we like to consider on a case-by-case basis. There are certain circumstances where it may be smart to offer an incentive. Some incentives can be offered from the start. For example, if your home is in an area that does not get a lot of traffic, we may offer an incentive to agents to bring us a buyer. Or if you know the appliances are at the end of their lifetime, you may offer a home warranty to help the buyers replace them. Other incentives, like helping with closing costs, are better used during the negotiation process.

What do you need to disclose?

It is smart and it is the law in Florida to disclose any issues that affect the value of your home and its functionality. Your buyers will have the right to inspect the home, so it is best they are not hit with bad news after going under contract. If you know of problems with the appliances, plumbing, electric, HVAC, roof, foundation, property lines, or deed, these need to be listed on the Seller’s Disclosure. If there are repairs that you can have done before listing, go ahead and take care of those. Anything that cannot be remedied before listing should be considered when setting your list price.

What happens if your home does not appraise at or above the contract price?

It sometimes happens that a home does not appraise at or above the contract price. When this happens, we go back to negotiations to determine if we can save the deal by adjusting both the sales price and the terms of the contract to the satisfaction of both buyer and seller. Usually, we can work it out and save the deal. You always have the right to refuse to lower the price to meet the appraisal, but it is usually in your best interest to try to work with the buyer to resolve the issue as the next appraisal could result in the same valuation. If you are concerned about the appraisal value, go ahead, and have your home appraised before setting the listing price.

How do you negotiate multiple offers?

A multiple-offer scenario can be a fun position to be in as a seller. We will help you through the negotiation process to select the right buyer– and that is not always the one with the highest offer. We need to consider how strong the offer is, whether they are offering cash or financing, how much they are financing and what type of loan they are using. How much they are offering to put in escrow and the terms of the inspection process are indications of their commitment to the deal. You may also draw on sentiment: are they buying your home as an investment or a place to raise their family?

We can help you answer all these questions and more.