How to Price Your Property to
Sell in Today's Market
If you're considering selling your Park City property you'll want to know how to select the correct list price so that it will sell within a reasonable period of time and for the highest possible price. In this webinar we will discuss two important questions to ask yourself to help you determine your motivation for selling. We then discuss the Pricing Pyramid and explain how your selection of a list price will determine not only how quickly your property sells but at what price.
Everyone wants to list their property at the highest possible price, but not so high that it doesn’t sell. There are four steps you can take to determine the right list price for your property.
1. Determine the Fair Market Value of your Property
Fair Market Value (FMV) is determined by looking at recent sales of similar properties to learn how much buyers were willing to pay for those properties. Appropriate value adjustments need to be made for differences between the properties to arrive at the fair market value of your property. An experienced Park City Realtor can provide you with this information.
2. The 10% Pricing Rule: Beware of Over-Pricing
I came up with the 10% Pricing Rule after thoroughly evaluating which properties sold during the past two years, and which ones did not. I discovered a pattern that repeated over and over again. When a property owner listed a property as high as 10% above its Fair Market Value it usually sold within a reasonable time. However, when the owner listed his or her property for more than 10% above its Fair Market Value it usually did not sell. In fact, buyers rarely even bothered writing offers on those properties.
In over 25 years of selling real estate in Park City I have never seen such a clear resistance point for buyers than what I have observed over the past two years. While I realize this market trend may change in the future, it is important to recognize that this is what is occurring in today’s market. Sellers should take this information into account when deciding on the right list price for their property. The closer you list your property to its Fair Market Value (FMV), the faster it will sell. Price it close to the FMV and you will likely see multiple offers, which may result in selling your property above its list price. List it for more than 10% above its FMV and it probably won’t sell at all.
3. List-to-Sold Ration and Absorption Rate
Over the past 18 months sellers having been coming off their list prices 4 to 6% during negotiations in order to sell their properties. We are starting to see this discount decrease in certain neighborhoods, so you’ll want to find out what is true for your property. This figure does, however, give you a general idea of what sellers have been willing to do during negotiations to sell their properties. Another important element to consider is the impact that Absorption Rate has on your list price. Absorption Rate tells us how long the current inventory of listed properties should take to sell. You determine the Absorption Rate for your property by first identifying comparable properties that recently sold and then calculate the Rate of Sales of those properties over the past year. From this figure you can calculate how long it should take for the current inventory of similar properties to sell based upon the rate of past sales. The math is simple: You divide 365 days by the number of comparable closed sales that occurred during the past year to get the frequency of sales in the current market. For example:
15 comparable sales during the past year
Divide 365 by 15 = 24.33
Rate of Sales: Comparable properties are
selling at a rate of 1 every 24 days
By knowing the Rate of Sales, we can calculate the Absorption Rate of the current inventory of comparable listed properties and estimate how long it would likely take for the current supply of comparable properties to sell. By multiplying the current supply of listed comparable properties by the Rate of Sales over the past year we arrive at the Absorption Rate, or the length of time it will take for the current inventory of properties to sell, assuming no new listings come on the market. Here is an example:
6 comparable properties listed
Multiply 6 by 24 (Rate of Sales) = 144 days
Divide 144 days by 30 = 4.8 months
Absorption Rate: 5-month inventory of
Comparable properties for sale
4. Desired Length of Time on the Market
The final question to ask yourself is how long do you want your property to be on the market? Or, to put it another way, how quickly do you want to sell your property?
This is where the Rate of Sales and Absorption Rate will guide you to the correct list price for your property. After you look at how fast similar properties are selling (Rate of Sales) and you consider how much competition you have in the current market, you’ll discover what the Absorption Rate is for your property. If your goal is to sell your property in the next three months, due to a job transfer or other deadline, and the Absorption Rate for comparable properties is six months, you’ll want to price your property more aggressively in order to sell it faster than your competition.
On the other hand, if you’re not in a hurry to sell your property you could list it at a higher price in an effort to get more money for it. It will likely take longer for you to sell your property but if you’re not in any hurry that’s okay. Every seller’s situation is different. It is important to realize where you stand in all this so that you can select the right list price for you. Set your list price based upon your desired length of time on the market after adjusting for absorption rate.
If you price your property too high (10%+ above its FMV) in all likelihood it probably won’t sell. If you price it at or slightly above its FMV, it will sell pretty quickly and you may receive multiple offers to choose from, which may also drive up your final sale price above your list price. If you choose the highest possible list price for your property without going over the 10% FMV resistance point, it will probably take longer to sell your property but you may receive more money for it when it finally sells. If list-to-sold statistics remain unchanged, you will likely sell your property for 94 to 96% of its list price at time of sale. There are many factors to consider when selecting the right list price for your property. Don’t hesitate to share the details of your unique situation so that we can give you the appropriate advice you need to make the right decision.
What's Your Property Worth Today?
Get a Free Property Value Assessment
Discover what your property is worth in today's market. Our free Property Value Assessment (PVA) will provide you with a professional opinion as to the value of your property, based upon a careful analysis of recent sales of similar properties. There is absolutely no obligation for you to work with us as a result of us providing you with this analysis. This PVA will provide you with the information you need to decide if this is the right time to sell your property based upon current market data.
*Your information will never be shared with any third party.