How do sellers determine sale prices?
A: When buying a home, we look at it in relation to similar homes in the area. Using the selling price of comparable properties, we reach a benchmark valuation, which could then be adjusted up or down.
Generally, we view data from the past 180 days. If there are no comps, we extend our search to the adjoining neighborhoods. The more similar they are in terms of demographics, transport links, housing inventory, the better. Zillow calculates home value estimates using a formula that takes into account sales data, tax assessments and some physical attributes of the home — though it’s often inaccurate.
It’s crucial to work with a real estate professional who understands local market trends.
For instance, I represented buyers in the Alto Sutton Manor neighborhood of Mill Valley, where the majority of homes were built in the 1950s and needed some work. There were no comparables that could support the purchase price. However, a Whole Foods moved in and a number of homes were being remodeled or rebuilt.
The location was super convenient and fit my buyers’ lifestyle perfectly. The younger couple paid almost three times the average sale price for that neighborhood. They basically established the first comp. After getting a cash-out refinance, they were surprised by the even higher appraised value.
Julia Bernadini, Bradley Real Estate, (415) 225-0468, julia@bradleyrealestate.com
A: Value is determined by qualified buyers, but how do buyers decide what to offer and ultimately pay for a property?
The prepared buyer will look at what they can buy in a broader area and bring that price to a single property for sale in a neighborhood. Then they can adjust for greater or fewer amenities.
In a seller’s market, you can’t underprice your property. Buyers will compete for a fairly priced property, bringing the sellers top dollar.
On the other hand, overpricing deters informed buyers. They might like a property but wait for a price reduction. While waiting, they may even find a better property at a more attractive price.
A home that lingers on the market becomes the subject of closer scrutiny. Questions as to why it hasn’t sold and what is wrong with it start creeping to mind.
In the present market, pricing on the lower end of the range has consistently sold homes more quickly for top dollar.
If sellers generate competition for their property, they have more leverage renegotiating throughout the transaction.
Susan Rowan, The Madison Company, (415) 342-7754, quince365@gmail.com
A: For the last few years, the Bay Area real estate market has been marked by a low supply paired with rising demand. In Berkeley and most of Oakland, we are in uncharted territory. Single-family home prices are the highest they have ever been, and new records are being set every day.
To realize the full market value of your home when selling, set your listing price on the low end of the range in which your broker expects it to sell.
A lower price brings attention to your property and allows for potential buyers to compete. Consider if you were to list your home for $1, you would make the front page of every real estate newspaper and blog and end up with 1,000 offers.
Most offers wouldn’t be strong enough to consider. However, from that pool of offers, you would find several buyers who are qualified and taking their best shot to win the competition for your property.
The above example is only hypothetical, and I don’t recommend wasting the time of that many people. However, this example illustrates what’s important. Having a large pool of potential buyers and generating lots of offers is the best way to realize the true market value of your home.
Devin Ratoosh, Ratoosh Team, Marvin Gardens East Bay, (510) 919-5499, devin@ratoosh.com