Determining List Price...

I heard this line from the movie Confessions of a Shopaholic;  "Cost and worth

are very different things."  It resonated with me because it's a concept that can be very difficult to explain to the homeowner when we are determining the list price of their home.

"Cost" is what you actually paid.
"Price" is the amount asked. 
"Value" is what it's worth. 

Who determines value?  The market determines value.  It's just that simple.

When a homeowner is interviewing agents to list their home, there are many things you should be looking for when choosing an agent.  Basing your decision on which agent tells you the highest list price is not one of them.  In fact, I recommend your choose your agent before you determine the price of your home.  Agents, have as much control over the price of your property as we do the weather.  A good agent is going to come into your home with a thoroughly prepared Competitive Market Analysis because market value is determined by facts not opinion.

You know when you go to the doctor and he gives you an X-ray.  That X-ray gives the doctor a pretty accurate picture of what's going on and he will analyze and diagnose from there.  The CMA  is very similar to that X-ray.  It gives us a clear picture of  where we are sitting presently and we can analyze the facts and determine the best route to take for optimal results.

What's in a CMA? 

A CMA will include recently sold listings that are the most similar to your home.  From that, we can determine a price range of what the market is willing to pay for your home.  I'll also show you the listings that didn't sell and we'll figure out why they didn't.  From there, we will look at all the competing listings.  These are the listings that are presently up for sale.  They are your competition.  This is where we'll discuss our pricing strategy.  We don't want to list your property at a price that will help your competition look even more appealing and hence help them sell their home.  We may, however, want to price your home in away that could make your competition work for you instead.  Combined with information on current statistics, the market's condition, trends and inventory, together, we will determine a list price that will allow you to receive the optimal price, in the most reasonable amount of time.

But why don't we just try listing my home at a higher price for a couple of weeks and if it doesn't work we just can lower it?

It's your home, and honestly, you have the final decision on what you want to list your home for but I strongly advise you not to do this for many reasons:

• A home is only a "new listing" for a while and the first 2 weeks is the most important time as it's the time the most people will see it. The longer a listing sits, the less traffic that listing receives.

 
• It's not only buyers that get excited to see your new listing...other agents get excited too.  If it's not priced right, the other agent's enthusiasm will wane.  They are not eager to show their clients a home that is overpriced.
• With the higher price, the real qualified buyers for your home may not even see your listing.  You may have inadvertently priced your house outside the perimeter of their search criteria.  If your listing fails to make itself know to them, how can they buy it?
• Buyers are educated. They'll spot an overpriced home right away.  And if a buyer doesn't, the mortgage appraiser will and the sale you thought you had is dead in the water.
• You risk your listing becoming stale.  The longer a listing is on the market, buyers may start wondering what's wrong with it.  Having your home on the market is stressful at the best of times.  Always being ready to show your home, maintaining a "show home" condition and still trying to live your life can be tough.   A savvy buyer may actually wait for it come down in price and use your beaten spirit against you.  A property listed too high initially, has a greater potential for selling less than market value.

• When a home is accurately listed at market value, a hot property can actually create a buyer's frenzy.  You could end up with a offer over your list price.  (Winnipeg has been experiencing this for a while now)

But I bought my house for xxx amount and I've paid xxx amount into improvements and you are saying that its value is less than all that added together?  I think it only fair that I get paid what it cost me.

Let me put this another way.  What if you inherited your great aunt's home.  You are quite content in the home you are living in now so you decide to put it up for sale.  Technically, it cost you nothing.  What would you expect to be paid for it?  It works both ways. When we make renovations and upgrades in our home there are going to be upgrades that may increase our market value and there will be upgrades that may only be important to us.  And then there are upgrades that fall somewhere in the middle.  What you paid for something yesterday has nothing to do with what it's worth today.

Cost and value are not related and they should never be confused.

All real estate sells for market value.

Keep warm.

I'm here for YOU.

~Ciao