"The most frequent problem I see with initial list prices is that they are too aggressive," observed Dawn Dause of RE/MAX Ultimate Professionals in Shorewood, Ill. "In our current market, a home priced correctly can sell in a couple of weeks. If it's priced too high, it can take much longer to sell and end up selling for less than it would have otherwise. The list price shouldn't be more than 5 percent above the market value of the property based on comparable sales."
Choosing the right list price for a home can be a complex process, and according to Phil Makarewicz of RE/MAX 1st Choice in Ottawa, Ill., a key objective is to balance the probable market value of the home with the current market conditions.
"I look at similar homes in the area that have been on the market in the last six months, both those that sold and those that didn't," Makarewicz said. "By analyzing market activity, the sellers and their broker should be able to determine a value range for the home."
Determining a price range can be relatively easy when quite a few similar properties have been on the market in recent months. In other instances, there may be few truly comparable homes sold or listed, so the value is harder to pin down and the range may need to be wider, Makarewicz explained.
Once a value range has been established, then market conditions must be considered.
Mary Braatz of RE/MAX Enterprises in Downers Grove, Ill., looks at several market factors when recommending a list price. Among them are:
- How large is the difference between the list price and the actual sales price of similar homes that sold recently? Braatz notes that in her area these days that difference is about 4 to 5 percent.
- How large is the supply of homes for sale relative to the pace of sales? Braatz looks at the months of supply of similarly priced homes. Less than a six-month supply indicates a market favorable to sellers so that a somewhat higher listing price can make sense, and that's the situation right now in some market segments, she reported.
- How well does the home match up to comparable properties? No two homes are identical, so the list price will be affected by a range of factors: condition, layout, square footage, finishes, location and even the color scheme. Understanding how all these factors can impact market value is where an experienced broker can provide valuable input to sellers.
Another factor in selecting the right listing price, reported Ricardo Morales of RE/MAX 10 in Chicago's Lincoln Park area, is the seller's sense of urgency.
"To sell a home quickly, list it close to the actual market value because that will generate maximum interest. If the seller isn't in a hurry, we can start somewhat higher. What you don't want to do is start with an unrealistically high price because the first three weeks are when you generate the most interest from buyers, and you don't want to waste that opportunity," he said.
As for later price reductions, Morales said he waits about three weeks to analyze the situation based on feedback from buyers, showings, views online and interaction on social media.
"At that point, we'll have a better idea if the home is overpriced and can talk about an appropriate price reduction, which lets the market know the seller is motivated."
According to Dause, taking price reductions quickly is a way to save money for the seller.
In her view, the longer it takes to find the sweet spot where the listing price is generating serious interest, the lower the eventual sales price is likely to be.
The RE/MAX Northern Illinois network, with headquarters in Elgin, Ill., consists of more than 2,300 sales associates and 106 independently owned and operated RE/MAX offices that provide a full range of residential and commercial brokerage services. The northern Illinois network is part of RE/MAX, a global real estate organization with 110,000+ sales associates in 100+ nations.
RE/MAX Northern Illinois
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