Inside Real Estate: Example Listing Price Scenarios

Last time I talked about choosing a listing price and said we'd look at two examples that point out the tension between selling your house quickly and getting as much money as possible from your house.

In example 1, the wish is to sell the house as quickly as possible. Let's say that you want the house sold in the next hour. We could list it at $100. Somebody would pay that. If you priced your house at an astonishingly low price, it would increase the chances that someone would hand over the money and buy the house on the spot. You could even say that the land without the house itself is worth at least $100. You would achieve your goal of selling your house as quickly as possible by ignoring your wish to get as much money as possible.

In example 2, the other wish is to get as much money as possible when selling the house. Let’s say you want to list the house for $5,000,000, which is probably nowhere near what you paid for it. How long do you think it would take to get the house sold for that price? In most cases, the house would be on the market until all the other houses are sold and someone really needed a house to live in. If there were no other houses available to be sold & someone really wanted to buy a house, they could pay five million dollars and buy yours. It may take many, many years for that situation to happen, but you would have achieved your goal of selling your house for as much money as possible by ignoring your wish to sell your house as quickly as possible.

Hopefully, these examples show you that there is a direct relationship between price and time when it comes to selling a house. Of course, you wouldn't choose something as extreme as either of these. But you can see how you must balance speed and money. The lower the listing price, the sooner it will probably sell, but the less money you will make from the sale. The higher the listing price, the more money you will probably make from the sale, but the longer the house will be on the market.

You tell the buyers a lot about your intentions with the initial listing price of the house. And you tell them even more by the changes in the pricing as the house remains on the market. As a general rule, it makes more sense to not start selling the house until you're ready, and to list it at the most reasonable price you can afford.

Inside Real Estate: Choosing a Listing Price

Let's say that you have a house that you want sold. You contact me and I come over to look at the house with you. We reach an agreement that I am going to sell your house. We are going to use an exclusive right-to-sell listing agreement. This means that I will be the agent working for you and I will follow all legal orders you give me about selling the house. In order to help you decide on the selling price, I will provide you some information about:

1. similar houses that were recently sold,

2. houses currently being offered for sale, and

3. those that were taken off the market without being sold.

If you have a range of comparable prices that are gotten from those three groups, you can make a decision. After studying that information, you choose a price that reflects both how soon you want the house sold and how much money you want from the sale. The price will be the compromise of those two wishes.

Of course, most people want the house sold as quickly as possible and for as much money as possible. But it's not often possible to achieve both.

Next time we'll look at two example scenarios.

Some Definitions of Listing Details

When I send my buyers a list of properties from the Navica MLS system, they see lots of information about the property. If it is about a house, here is some of the information that will be shown:

# BEDROOMS: How many bedrooms total are in the house. Bedrooms must have a closet, an escapable window, & a proper ingress & egress (a way in and a way out). Bedrooms must also be shown to be conforming or non-conforming in the “room size” area. Besides missing a closet or not meeting building codes for ingress/egress, non-conforming bedrooms are those in which someone could not escape from in case of a fire. They usually have no windows, windows that are too small, or windows that are too high up the wall for children to escape from.

# BATHROOMS: How many bathrooms total in the house. Each plumbing fixture counts as a ¼ in a bathroom. If it has a sink and toilet, it is a “half-bath.” If it has a sink, toilet, and shower, it is a “three-quarters bath.” If it has a sink, toilet, shower, & bathtub, it is a “full-bath.” If a bathroom is a full bathroom and has 2 sinks, it is actually called a “5-piece bathroom suite” instead of 1 ¼ bathroom.

GARAGE TYPE and GARAGE CAPACITY: A garage can be attached, detached, a basement garage, carport, parking spaces, or none. The capacity is based on how many vehicles can be parked in that garage. Sometimes people fill in garage dimensions if a garage is extra deep or extra tall for oversized vehicles.

YEAR BUILT and/or YEAR REMODELED: “Year Built” should be the date of the original building permit. If the house was remodeled, there should be appropriate building permits for that. A house can be updated without being remodeled if minor changes are made, such as new paint, appliances, flooring, etc.

AREA and/or SUBDIVISION: A house has a mailing address and/or street address which may tell you something about its location. When I search for property for someone, I don’t search for a specific address because it would take too long to check if every property was listed for sale. However, I can search by area in the MLS system or I can be more specific and search within a certain subdivision. Usually there are boundaries to the specific areas and you can find them at the Grand Junction Area Realtors Association map.

ELEMENTARY, MIDDLE, or HIGH School: If a buyer has children in the District 51 school system, they may want their children to stay in the same school as their current one. I can search by a specific school. They may also request a search within several elementary schools that are near to each other or a specific school that they feel is a better match for their children. You can find out which school your child will attend by going to the School District 51 schoolboundary website.

FRONTS: The front side of the house faces this direction. It can north, south, east, or west, or diagonal. Some people have preferences for houses to face south so the snow will melt off the driveway. Some people want the house to face west so they have a shady backyard in the evenings.PARCEL #: The parcel number mentioned at the Mesa County Assessor’s Office.

SELLER NAME: This must be the seller’s actual last name, not just the owner, so the person/s who legally own/s the property. Sometimes it just says "Owner" so the seller has some privacy.

SELLER LICENSED: If the seller is a real estate broker, he or she may have an unfair advantage when selling the property, so they must disclose to the potential buyer that they have a license to work in real estate.

TERMS: How the property can be purchased, such as with cash, a conventional loan, or an FHA or VA loan. Some properties that have been foreclosed are in such bad shape that they can only be purchased with cash. Also sometimes an owner will provide the financing to make it easier to buy the house, so it will say “owner carry.”

EM DEP and EM HOLDER: How much is required by the seller to show that a buyer is serious about purchasing the property. It is usually around 1 percent. The earnest money holder is the person who holds the deposit between making the office to buy and the closing. At the closing, the buyer’s earnest money counts towards the amount the buyer brings to the closing table.

TITLE CO: The title company is the one who is going to issue the title insurance on the property when it is transferred to the new owner. The seller pays for the insurance so that a “good title” can be given to the new buyer.

That's it for now. Let me know if you have questions about other things you have found on a listing or advertisement for a home.

Choosing a Listing Price

Hello, readers. I have been learning so much new material that I've been overwhelmed by all the good topics to blog about. And I've been busy with my class: after I went through the chapters and homework and quizzes, I had to study for a huge test that covered lots of material regarding national real estate laws. There will be more of those tests, so I developed a process of studying the material and doing well on the tests.

I'd like to share with you about finding a listing price when a house is offered for sale. Let's say that you have a house that you want sold. You contact me and I come over to look at the house with you. We reach an agreement that I am going to sell your house. We are going to use an exclusive right-to-sell listing agreement. This means that I will be the agent working for you and I will follow all legal orders you give me about selling the house. In order to help you decide on the selling price, I will provide you some information about:
1. similar houses that were recently sold,
2. houses currently being offered for sale, and
3. those that were taken off the market without being sold.

If you have a range of comparable prices that are gotten from those three groups, you can make a decision. After studying that information, you choose a price that reflects both how soon you want the house sold and how much money you want from the sale. The price will be the compromise of those two wishes.

Of course, most people want the house sold as quickly as possible and for as much money as possible. But it's not often possible to achieve both.

In example 1, the wish is to sell the house as quickly as possible. Let's say that you want the house sold in the next hour. We could list it at $100. Somebody would pay that. If you priced your house at an astonishingly low price, it would increase the chances that someone would hand over the money and buy the house on the spot. You could even say that the land without the house itself is worth at least $100. You would achieve your goal of selling your house as quickly as possible by ignoring your wish to get as much money as possible.

In example 2, the other wish is to get as much money as possible when selling the house. Let’s say you want to list the house for $5,000,000, which is probably nowhere near what you paid for it. How long do you think it would take to get the house sold for that price? In most cases, the house would be on the market until all the other houses are sold and someone really needed a house to live in. If there were no other houses available to be sold & someone really wanted to buy a house, they could pay five million dollars and buy yours. It may take many, many years for that situation to happen, but you would have achieved your goal of selling your house for as much money as possible by ignoring your wish to sell your house as quickly as possible.

Hopefully, this shows you that there is a direct relationship between price and time when it comes to selling a house. The lower the listing price, the sooner it will probably sell, but the less money you will make from the sale. The higher the listing price, the more money you will probably make from the sale, but the longer the house will be on the market.

You tell the buyers a lot about your intentions with the initial listing price of the house. And you tell them even more by the changes in the pricing as the house remains on the market. As a general rule, it makes more sense to not start selling the house until you're ready, and to list it at the most reasonable price you can afford.