Setting the price right

Experts say the key to selling a home quickly is asking the right price - a balancing act achieved with the help of a good agent familiar with your neighborhood and recent sales of comparable homes.

August 07, 2005|By Nancy Jones-Bonbrest | Nancy Jones-Bonbrest,SPECIAL TO THE SUN

Pricing a home has always been a delicate balancing act, but the current hot real estate market - driven by high demand, low inventories and historically low interest rates - can make setting sticker price even trickier.

Price it too low and a house is gobbled up before the sellers have a chance to second-guess whether they asked too little. Price it too high and it can sit on the market, leaving buyers wondering what's the matter with it. Price it just right, and the expectation is that buyers will line up and compete for the house.

For Chuck and Winnie McCulloch, who sold their Ellicott City home last month, pricing their home was easy.

Last year, the couple decided to downsize to a new condominium, also located in Howard County. Because it will not be ready until September, they had time to study the real estate market, checking area housing prices each week in the newspaper.

When they were ready to put their home on the market, they chose a real estate agent who had been referred to them, who knew the market and whom they trusted. Then, after looking through comparable sales of other area homes with their Realtor, they set a price just above what the last house in their neighborhood sold for.

"It's not that tricky," said Winnie McCulloch. "We went just above, but not too far above, the last one sold. And it worked. We got exactly the price we asked."

The key to finding the right price, say experts, is to keep emotion out of it, use a real estate agent who knows the neighborhood and one that the sellers trust. After that, it's just a matter of studying a complete "comparative market analysis" or "comps" that shows the prices of recently sold comparable homes, then setting a price.

McCulloch said the last house in their neighborhood sold in the high $500,000s, so they priced their house at $600,000. It sold within days.

"We were told that if you go too far above the price [of the last house sold] and it sits for too long, then you will have to lower the price significantly," added McCulloch.

With such an active market, comps are usually easy to find, say Realtors. If a house is unique or in a neighborhood or area that doesn't see a lot of activity, it can be a bit tougher to set the right price.

"We try to have the seller priced right there at the last comp," said Janice Mattson, a listing agent with the Pat Hiban Real Estate Group in Ellicott City and the McCullochs' agent. "Then if it's worth it or more, the market will take it up."

Gone are the days when buyers and sellers haggled. Instead, if the house is priced right, buyers seem to jump on it, say experts. If it is priced too high, they stay away from it.

"To me there is no such thing as underpricing a house. If it's a good house that is priced right, it will get bid up," said Mattson.

But Michael Anikeeff, chairman of the Edward St. John Department of Real Estate at the Johns Hopkins University, said some agents may be pushing too hard for quick sales and not pricing houses as high as they could be.

"Brokers may not be as aggressive as they should be," said Anikeeff.

He suggests going higher on the price and see what happens.

"Don't leave money on the table," said Anikeeff. "We would hope that it goes fast, but a broker should be providing some services too."

With no slowdown in the market in sight, the National Association of Realtors again raised its forecast for the housing sector with both existing- and new-home sales expected to set a record in 2005, leaving some homeowners anxious to cash in.

The national median existing-home price for all housing types was $219,000 in June, up 14.7 percent from a year before; it was the highest year-over-year increase since November 1980 when annual appreciation was 15.6 percent, according to the association.

In the Baltimore area, the average sales price of a house hit just over $300,000 in June, a more than 17 percent rise from June last year, according to the Metropolitan Regional Information Systems Inc.

Choose agent wisely

"There's been so much appreciation, sellers sometimes think their house is worth more than it was just last month, which isn't always the case," said Connie Morrissette, manager of the Annapolis Plaza Coldwell Banker Residential Brokerage. "If you want to sell your house in a reasonable time, it has to be priced right."

She cautions sellers to pick their Realtor wisely. She suggests they either follow the standard advice to interview three real estate agents, or go with someone they trust or who knows the neighborhood.

Agents have a responsibility to the seller to do their homework, she added.

"It's their obligation as an agent taking on the job. It's a fiduciary responsibility to make sure they price that property properly," said Morrissette.

A complete comparative market analysis is a must, said Henry Strohminger III, a Realtor with Long & Foster in Timonium and the president of the Greater Baltimore Board of Realtors.

But he cautions to be wary of the temptation to overprice a house.

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