Home Economics: Figuring out when the price is right takes homework

During the housing boom, many real estate agents found it extraordinarily tough, if not impossible, to come up with even ballpark asking prices for their listings.

"Values were increasing at a pace we had never seen in this area," said John Duffy of Duffy Real Estate on the Main Line.

For four-plus decades, real estate agents had been used to price appreciation of 3 percent to 6 percent a year, "and then the boom came along, and we were seeing a much faster and higher appreciation, which made it very difficult to price properties," Duffy said.

The results: multiple bids, and prices exceeding what homeowners were asking.

Today's market, of course, is very different. And, local Realtors say, the way houses are priced has changed dramatically.

"Homeowners need to price their homes right, or they won't sell," said Art Herling, Long & Foster's regional vice president. "Buyers are extremely savvy and cautious, and, as one builder said, 'It's hip to be conservative.' "

You must be able to "defend" the asking price, Duffy said.

One way is to research similar homes that have sold in the last few months in a neighborhood or town. Compare the house, too, with others on the market in the same area.

"It is important for the Realtor and homeowner to be totally honest with the comparison, and make sure you are comparing apples with apples," Duffy said.

Active listings "will give the seller a bird's-eye view of what the competition is doing, and what he or she is up against, as a comparative tool," said John Badalamenti of Prudential Fox & Roach in Wayne.

Added Laurie R. Phillips of Prudential Fox & Roach in Center City: "When a new buyer is out looking at homes, they will compare the prices of what they are seeing."

Days on the market is another important factor to consider, Duffy said. If a similar property has been listed for a while, it's a good indication the house is overpriced.

Badalamenti shows his sellers the absorption rate - the number of months needed to sell existing inventory - and the last list price versus the final sale price.

His objective: to let the seller consider pricing the house at the highest amount the market will bear, while not discouraging "ready, willing, and able buyers."

Condition, condition, condition: That's the most important thing in pricing a house today, said Center City Realtor Mark Wade.

"It is all about the emotional impact of the home," Wade said. "The home doesn't need to have a new kitchen and bath and the latest look, but it does have to show clean, fresh, and decluttered."

And, Wade said, he can't stress the importance of "emotional impact" enough: "That is the missing link that is most overlooked by sellers and agents when pricing a home."

Weichert Realtors' Noelle Barbone said her agents had concluded that condition was critical to pricing.

"Homes that have been well cared for seem to be holding their own as far as prices go," said Barbone, manager of Weichert's Media office. "We are still seeing multiple offers for these homes."

Ruth Feldman of Weichert Realtors in Mount Airy puts herself in potential buyers' shoes, she said, and "considers how they will react to the house. This is an intangible 'gut feeling' based on 20 years' experience, and also based on knowing the market and the tangible things buyers are looking for."

The best houses with the most amenities - "new [or newer] kitchens and baths, updated HVAC systems, hardwood and tile floors, staging inside and out, original architectural details . . . are the ones that will attract the most attention and showings - if they are priced within range for that type of house in that neighborhood," Feldman said.

If the house has less to offer, or just doesn't show well, "I reduce [the price] by more than the amount of work needed, as those houses have to be priced very attractively to draw buyers," she said.

Buyers interested in homes where maintenance has been deferred "are negotiating wisely and renegotiating after the home-inspection report is reviewed," said Carolyn Sabatelli of Weichert's Media office.

Looking back at sales from a more robust market is irrelevant, said Joanne Davidow, vice president and office manager at Prudential Fox & Roach in Center City.

"Sellers may be tempted to price a house with what they 'need,' but it is important to price at a realistic range," Davidow said.

"Pricing is more of an art than a science," added Feldman, "although appraisers will disagree."

 


Contact real estate writer Alan J. Heavens at 215-854-2472, aheavens@phillynews.com, or @alheavens on Twitter.