The Difference Between Price and Price Strategy

Price vs. Pricing Strategy

Many sellers when interviewing a real estate agent for the job of getting their home sold ask the $64,000 question….

What do you think my home will sell for?

In reality, no real estate agent has the ability to predict what any home will sell for. At best an agent can give a 5 – 10% range in which the home will sell.

And in reality, it is the homeowner that sets the listing price, not the real estate agent.

Today, May 21, 2019, 35% of the homes on the market have reduced their price. One third adjusted their asking price downward in a very strong seller’s market.

The list price matters.

These statistics clearly indicate how difficult it is to pick the exact price a home will sell for.

There is more than one way to achieve the final sales price you are looking for. Below you will find the three most common strategies when it comes to pricing a home for sale.

Strategy #1 – The “Traditional” Strategy

We call this strategy “traditional” because pre-internet this was the most popular pricing strategy in the market.

In this strategy, a seller prices their home at the high end of the price range or even beyond the upper limit (typically 10% or more above fair market value).

There are four main reasons most sellers employ this strategy.
  1. The seller thinks their home is worth more than what the numbers show.
  2. The home is unusual and hard to value
  3. The seller wants to leave “room to negotiate”
  4. There is no hurry to sell and/ or is not 100% motivated to sell.

Few serious sellers use this pricing strategy today. The internet fuel buyer will completely ignore a home with too high of a price. They do not come to look at the home and they do not make offers of any kind.

Strategy #2 – The “Fair Market Value” Strategy

This strategy calls for pricing the home right at, or even a tad below, the anticipated sales price.

Here are the factors a seller considers to set a fair market value

  1. Study the most recent sales in the area
  2. Consider the homes currently for sale
  3. Analyze the current market trends in the neighborhood
  4. Factor in the economic trends of the region

A home that has a successful Fair Market Value will look like the best value for the price on the market.

The goal of this strategy is to quickly attract a large pool of active and qualified buyers.

This strategy works for sellers who really want to sell their home in a convenient time frame at a very equitable price.

Homes that are priced at ‘fair market value” typically…

  1. Get more money on a dollar per sqft basis
  2. Attract a contract 4 times faster than homes not priced at “fair market value”
  3. Sell for at or above the original list price.

Strategy #3 – The “Event Pricing” Strategy

The seller takes the pressure off themselves to pick the “right price” in this strategy. The buyer must figure out what it will take to beat out all other bidders on the home.

Every qualified and ready buyer in the price range can clearly see the value of your home when you use this strategy.

This price is going to be at the low end of the price range or even lower.

The goal of “event pricing” is to generate multiple offers and create a bidding war. The dynamic changes from IF they will buy to HOW MUCH will they pay to buy.

This strategy is not for every seller. This strategy is best for the seller who really needs to sell their home and wants to sell sooner rather than later and wants to be sure they haven’t left any money on the table.

So which strategy is best for you?

You determined the right strategy by clearly defining your goals, priorities, and time frame for selling.

The biggest fear a buyer has right now is overpaying for a home.

Therefore when a buyer finds themselves bidding against other buyers for a property it gives them more confidence in the value of a home and they tend to make stronger offers when they sense other buyers will also be making offers.

When a buyer sees that a home has been on the market for a while, or the price has been lowered one or more times, or no one else seems to be interested…. their fear of not wanting to overpay tends to take over and as a consequence they don’t bid as aggressively (if they bid at all) in these situations.

Downsizing Your Home

Congratulations!! Downsizing is within your grasp – the kids have moved out and you are free… FREE!!!

Your priorities have changed from when you bought this home. What would change if you moved to a different home? Could you travel more, have more cash, be closer loved ones or live a different lifestyle? Downsizing does not always mean a smaller home or making sacrifices. It means getting a home for the way you want to live today.

My husband and I made the move from our big multi-story home on the hill two years ago. We purchased a one-story home with just enough yard that was much closer to our office. The best thing? We were able to transfer our property tax to the new home! More on that little gem later in the post.

Here are 10 things to consider as you figure out where you want to be “when you grow up”.

You don’t need the great schools neighborhood

One of the best parts about being downsizing homebuyer in Glendale CA is that you don’t have to worry about schools. You don’t have to check school ratings, and you don’t have to worry about daycare and extracurricular activity options. But there’s a more significant advantage than just saved time and hassles: you can avoid the inflated house prices that go along with those great school districts. Studies have shown that homes in Glendale and the Foothill’s best school districts sell for 20-30% more than those in average school districts. Anecdotally, we regularly see similar homes in the same neighborhood (but in different school districts) sell for tens of thousands or even $100K+ apart.

Certain neighborhoods in Glendale and La Canada Flintridge are known for their schools, and people go to great lengths to get an address that will allow their kids to qualify to attend. When you downsize, avoid the hot school neighborhoods to save cash or score a better house or more walkable community for the same price.

Pro Tip: If you’re buying a house in a mediocre school district, recognize that you’ll be impacted when you sell too, so enjoy the discounted price at the front-end, but expect to get dinged for it when you sell too.

Consider downsizing the yard

When the kids were little you were desperate to kick them into the backyard to gain a little peace and quiet. Now that they are out of the house, do you need the huge yard with all it’s maintenance and expense? Perhaps all you really need is enough room to dine and relax outdoors.

Pro Tip: Homes with huge yards attract the most amount of competition and money in today’s market. By focusing on homes with small lots you might get a much nicer home for your dollar.

Go for a condo or townhouse

Do you want more travel, convenience, and luxury in your new lifestyle?

Consider downsizing into a condo and townhome! They are the perfect choice for that “shut the door and go” lifestyle. You won’t worry about leaving a vacant home or yard maintenance while you are away.

You’ll be able to afford far more with a condo or townhome. This can translate into a better location, more space or more luxury.

Pro Tip: Remember that the HOA fee is not really an “extra” expense. It is a way to share the cost of maintenance and insurance.

Do you really want to be isolated up in the hills?

Let’s face it. You are thinking about downsizing into a home that will serve you as you age. Did you know that isolation is a huge problem with older people? Complete privacy seems like a good idea now, but how will you feel in later years?

Consider homes on regular streets instead of narrow winding roads. You, of course, will always be able to drive like a twenty-year-old, but your friends will not. Make it easy for those old fogeys (and the occasional ambulance) to get to your home.

Avoid homes way above or below the street

Most have a lot of stairs to get to the front door. Knees and hips get replaced and those aches and pains do not get better with age.

Downsizing is more about convenience and lifestyle than size. Keep your stair climbing to a minimum!

Prepare for one story living

If you look at multi-story homes, make sure there is at least one bedroom and bathroom downstairs. Or, check to see if an elevator can be installed in the future. This will give you maximum flexibility to age in place.

How’s the parking access?

You may be able to squeeze your BMW 7 series into a parking space fit for a Yugo, but your parking skills will deteriorate over time. The ideal is a modern sized garage with direct access to the home, but this is hard to get in Glendale Ca and the Foothills. But it is reasonable to look for a garage with street exposure instead of one tucked into the back of the lot.

Avoid narrow driveways and driveways with a steep or uneven grade. If a garage is not possible, look for a covered carport or generous driveway apron.

Look for ADU Potential

Accessory Dwelling Unit (ADU) might the perfect solution for anyone who wants to age in place. It allows you to have a second independent living unit on your single family zoned lot. Look here for more details about the ADU trend in our area.

An ADU give you marvelous flexibility. Technically you are not downsizing as much as you are improving your choices. A relative, adult child or caretaker could live there while you maintain privacy and lifestyle in the main home. Or you could move into the ADU and rent out your main house for monthly cash flow in your later years.

Pro Tip: ADUs can be a completely seperate structure, a portioned off section of the mian home or a garage conversion

Consider Downtown

Isn’t free time marvelous? Your nights and weekends are no longer consumed with homework, lessons and sportsball events.

Wouldn’t it be wonderful to experience the energy and diversity of Downtown? All of our Downtown districts are experiencing a vibrant resurgence and development. While it is possible that you will downsize your space you will upsize your lifestyle!

Glendale Downtown was named Curbed LA neighborhood of the year for its luxury apartment developments, the full concierge lifestyle of the Americana at Brand, Arts and Culture developments and shopping.

Pasadena Old Town has long been a destination for shopping, museums and theater. Check out the Norton Simon Museum!

Downtown LA (DTLA) is filled with globally known destinations like the Disney Hall, The Broad Contemporary Museum, Los Angeles City Hall and more. It is worth noting DTLA’s importance and a transportation hub. Amtrak and the Metro line can connect you with all of Greater Los Angeles and beyond.

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Take advantage of Prop 60/90

Proposition 60/90 allows you to transfer your property tax to a replacement property (read about it here) It is an incredible incentive to get rid of the big expensive family sized home and move to a sexy hassle-free pad.

You must pay attention to location as you plan to downsize. Only certain counties participate and this only applies to people who transfer within the state of California.

If you need to sell a house in Carrollton, we buy houses Carrollton Tx.