Pricing A Home To Buy or Sell

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Selling homes in Fairview, Lucas and Parker is more an art than a science.  We have found that most Realtors bringing buyers to this area for the first time have a very difficult time coming up with an offering price.  Sales are limited and the properties are all so unique.  This is a big area by land size, but not by the number of homes.  Remember, there is almost no high density housing in these towns, so there are fewer homes. 

Pricing a home in Allen or Plano, where the lots and homes are fairly similar and located on the same street or series of streets is much easier!  We might have three or four home sales on the same street with the same floor plan.  Or there could be 15 custom home sales within the same subdivision, all fairly recent. 

In Fairview, Lucas and Parker, we could have 3 home sales to work with over the past year in a particular price range, and those might not even be that similar to the subject home.   To be a productive Realtor in this area, you had better have a good handle on the market, know what people are looking for and how it compares with the other homes which have sold or are currently on the market!

If you were to ask 5 Realtors and 5 appraisers into a true custom home on acreage in Fairview, Lucas, or Parker, ask them all to price it, you would probably get 10 different opinions of value.  Surprisingly, we all have the exact same information to work with on the multiple listing service!  Much of pricing a home in this area comes down to a "gut feeling" on the part of the Realtor ... what does that home have to offer over the other homes?  How much demand is there going to be for it?  How much value does the lot add to the home?  That is why it is important to use a Realtor who is seasoned in the area.

And Now, how NOT to price a home ...

First Suggestion ... don't try to price a home based on the tax rolls!  Any Realtor who has been in the business for any length of time will tell you that the tax rolls are meaningless when it comes to ascertaining true values.  Realtors use them to get the square footage of the home, amount of land, and yearly taxes.  We recently sold a home for well over $1 million which was on the tax rolls for $600,000, so that should reinforce that point.  Many homeowners will fight their taxes every year so their home's assessed value might be substantially lower than other similar homes in the neighborhood.  There also might be homes in the subdivision that started out with a high assessment and the owners never contested their taxes.  Those homes might be overvalued on the tax rolls.  I would say, more often that not, the assessed values on the tax rolls are lower than the actual market value of a home, but this is not always the case.

Second Suggestion ... Be careful when pricing a home on a per square foot basis when making an offer.  When a Realtor runs a comparable marketing analysis (CMA), it will automatically calculate what a home should sell for based on a price per square foot of home.  The CMA is a good starting point, but it should not stand on its own when it comes to the final determination of value.  As mentioned, no two homes are alike especially in this area and rarely are two lots the same.  Let's say a seller built a true custom home in 2002.  The home itself cost him $500,000 and he paid $165,000 for the 1 acre lot with trees.  You ask your Realtor to run a CMA using the criteria of "homes built in 2002 on a 1 acre lot".  Up pops a home that cost $350,000 to build and it sits on a "bald" 1 acre lot that cost $80,000.  In addition, this home did not have granite countertops, 8' solid doors, stainless steel appliances, etc., etc.  Should the sale price of that home be used as a comparable with the home you are looking at?  Of course not.  This is when your Realtor had better know how those homes all compare to each other or you are going to run the risk of insulting the seller with a low offer or paying too much with a high offer.  That is what specialization by area is all about for Realtors!  If you want to see how we do it, just click here.

Third Suggestion... Always remember, what you paid for your home, what you want your home to be worth, and/or what your neighbors or friends told you your home is worth is usually the very worst way to establish a value on your home.  A knowledgeable Realtor will value your home based on solid sale comparables (not listed prices) of other homes in your general area with your home's amenities. 

Final Thought ... the truth about appraisals.  When I first began selling residential real estate, one of the real "old timers" told me that she had never lost a sale to an appraisal.  By that, she meant that she had never had a home go under contract and then not sell because the home would not appraise for the contract price.  I remember being awed by this and thought "Wow, she must really have a handle on what a home should sell for".  I now know what she was talking about.  I can honestly say that I have also never lost a sale because of a deficient appraisal.  Am I a genius in pricing my listings?  Absolutely not!  Here is a link you should read about appraisals.