Sunday, October 25, 2015

Top 6 Factors in Pricing a Home for Sale

By Ken Urman, Realtor

To many people, the factors that contribute to the way a home is priced for sale seem mysterious. In fact, this is one of the most common questions asked by sellers and by some buyers. The seven factors considered by most realtors and appraisers to set a sale price are actually not mysterious at all. However, there are many factors that affect selling price, and no two homes are identical.


It is important, first, to distinguish between the Listing Price (the price advertised and asked for the property), determined by the seller and his/her Realtor; the Offered Price (the price offered by a potential buyer), determined by the buyer and his/her Realtor; and the Sale Price (the final price negotiated by the buyer and the seller and their respective Realtors. The seven factors most commonly used in pricing a home for sale are:

(1)  Local Real Estate Market Conditions

In the Seattle-Bellevue-Mercer Island area today, these conditions are very important. We are currently experiencing a shortage of homes for sale and an abundance of potential buyers. In business terms, demand is far greater than the available supply. This is called a Seller’s Market. Typically, sellers are able to ask higher prices and find buyers willing to pay the asking price or more to own a desirable home. Sometimes, there are multiple bids for desirable available homes, which results in competition and even bidding wars. This is the first type of market.

The second type of market is called a Buyer’s Market. Under these conditions, there are typically more homes available for sale than there are buyers. Sometimes, either listing prices are reduced or homes remain available for some time, with some not selling at all.

The third type of market, a Balanced Market, is characterized by some equality between the number of homes for sale and the number of potential buyers prepared to purchase them. In terms of both buyer and seller interests, this is the most desirable type of local real estate market.

Other factors that can influence local market conditions include:
·       An event that affects the desirability of a neighborhood or region either positively or negatively (for example, Bellevue was ranked one of the most livable cities in the US in recent months)
·       Some change affecting major local employers, especially a leading employer moving to the area or leaving the area
·       Local Schools and their public rankings. 
·     Transportation improvements. For example; new light rail lines going into many areas.

(2)  Comparable Market Analysis

In setting a listing price for a home, many Realtors conduct a Comparable Market Analysis (CMA). This process identifies homes that are “comparable” to the seller’s home and compares the “selling price” of these homes. There are two primary reasons experienced professionals use a CMA: first, it helps to establish a base price based on what buyers are willing to pay for a comparable home at the current time, and, second, it helps the Realtor keep the listing price within a range of what lenders will accept as a reasonable price for the home.

Mortgage lenders typically look for at least three comparable home sales occurring in the last 12 months at roughly the same price. If a selling price negotiated between buyer and seller is too high, the bank may not approve the loan. However, your local Realtor will often have a better sense of the current market climate than an appraiser.  When lenders challenge the price, the seller’s Realtor can usually explain the pricing justification and resolve most problems with lender appraisals.

(3)  Factors Based on Location and Neighborhood Characteristics

We often hear the phrase, “location, location, location” in connection with home prices and desirability. In calculating the price of a home, location refers to the geographical location of the property. Is the property located across the street from a busy shopping center, or at the edge of an industrial/manufacturing zone? Is the home within city limits or in a suburb? Is it located on a busy road or is it on a quiet street in a residential neighborhood. Is it proximate to an airport, railroad tracks, high-voltage power lines, or an expressway?

Characteristics of the neighborhood in which the home is located also influence price. Is the home located in an older, established and thriving neighborhood or in a decaying neighborhood? Is it located in a high-crime area? Is the neighborhood considered desirable? Is it typically populated by white collar executives and professionals, by middle class people, or is it a subsidized neighborhood? How are the schools rated? What local amenities are nearby (parks, shopping, hospital, entertainment venues, restaurants, etc.)? Is public transportation available? How does the tax rate for the neighborhood compare to other neighborhoods? Is the home on the waterfront? Does the home offer spectacular views?

All of these location and neighborhood characteristics can affect the listing and selling price of a home in any area. An experienced professional Realtor is a great benefit in assessing these factors and how they affect pricing due to his/her extensive knowledge of local communities and neighborhoods.

(4)  Upgrades and Other Special Features of the Property

No two houses, even if built with the same floor plan, are identical. They might be differentiated by features of the yard or upgrades and additions to the home. These features are important factors in pricing a home. If the upgrades and additions are desirable to potential buyers, at the time of the sale, they will influence the price upwards. If they are not desirable or are poorly done, they might influence the price downwards. The right upgrades to a home will also make it sell faster once it is listed.

Among the most desirable upgrades and additions to homes on the market today are:
·      Gourmet kitchen
·       Energy efficient windows, doors, appliances, roofing, etc.
·       Garage (usually attached)
·       Smart-home features
·       Decks, landscaping, outdoor kitchen
·       Upgraded bathrooms
·       First floor master bedroom or single-level living
·       Security systems

(5)  Motivation of Buyer and/or Seller

The urgency of the need or desire to sell or buy a home can also influence the selling price. Often, people who need to sell quickly (perhaps because they are being transferred to another city) are willing to make some concessions on listing price in order to make a quick sale. Similarly, some people who like a home and need to buy quickly will offer a higher price for the home they want if, for example, they want to move in before the beginning of a new school year.

Occasionally, sellers who are in no hurry to finalize a deal will overprice a home. The result is often that buyers overlook the home (because of price), and in time it becomes known as “the house nobody wants.” In this case, I typically advise the sellers to wait until they are motivated to sell before they list their home on the market.

(6)  Choice of Local Realtor

All Real Estate agents are not the same. Your choice of a local agent, whether you are the seller or the buyer, can become a factor in the price of a home. An inexperienced or incompetent agent can cost either party to a real estate transaction.

Sellers need agents who will do far more than list a property with the Multiple Listing Service and hope it is seen by the right person. A seller’s agent should price the house carefully, actively market the home, and be a strong negotiator on your behalf. In addition, I believe it is important to choose a full-time, experienced professional Realtor (a member of the National Board of Realtors) with a strong track record in the area, who is honest and creative in listing and selling your home and attending to every detail related to the closing of the transaction.


These are the top 6 factors in pricing a home for sale. If you would like to know more about how these factors affect the listing price of your home, please give me a call. I would be pleased to put my experience, knowledge and professionalism to work for you. And remember, I’ll bring the coffee.

Thursday, October 8, 2015

Just Listed: Award-Winning Mercer Island Home

Now available on Mercer Island, this award-winning home on desirable Forest Avenue boasts 5 bedrooms, 3 ½ baths, and 5,396 square feet of luxurious living space. Both formal and informal spaces, including a home office, bonus/media room, and family room offer ample space for both entertaining and relaxing. Three fireplaces will keep you cozy through the Northwest fall and winter. 

The updated chef’s kitchen features slab granite counters, double ovens, stainless steel appliances, a Sub-Zero refrigerator, and custom cabinetry, and offers quick access to an entertainment-sized deck.  Large windows afford views of surrounding greenery from almost every room, and the light-filled living room and den on the main level feature vaulted ceilings for an airy feel.

Upstairs, the spacious master suite is a calm retreat, and French doors open to a lovely private deck and serene territorial views. The master bath features a large jetted tub and separate shower, and a huge walk-in master closet has room for everything.

The lower level spaces offer numerous options. A large space with a separate door to the outside is perfect for use as a professional office, or utilize the wired-in speakers to use the space a home theater. A downstairs play area and custom “big toy” in the backyard offer hours of fun; slide, hang out in the fort, or play tether-ball.

The home’s large deck looks out into the trees, and is the perfect spot for relaxing with your morning coffee; and for outdoor dining and entertaining.

Please contact listing agents Ken Urman or Jane Potashnick for a private showing of this home.