Setting A List Price

Setting a price for your home must be considered carefully. When you go to sell your home, you are not just selling it to the buyer. You are also selling it to the listing agent, and the buyer’s agent, the lender, sometimes the buyer’s parents, and do NOT forget the appraiser who has been known to sink more than one deal.  The first showing is probably on the internet.  More than 92% of buyers started their home search looking at pictures of houses on the internet. We cannot stress enough, how important these first impressions are to the sale of your house.

There are four main features that influence how quickly and for how much your home sells for:   location, list price, condition/amenities, and marketing.  Let us review those things that you can do to:

Location:

There is not much to be done to improve location.  It mostly is what it is. A home on the corner of a busy street will not appeal to same buyers, or as many buyers, as one nestled on a quiet cul-de-sac.  If your home is up against a landfill, elementary school, industrial buildings, etc. more buyers will be turned off and move along to the next home on the market. However, there are some things you can do inside to improve the living area of a home (see below) and improve it’s appeal.

You can suggest a specific route into the neighborhood if there is one better than the others.  For example, there is one gorgeous neighborhood on Lake Jackson that has one route to it that goes through a neighborhood of mobile homes and another route through rolling hills and large single-family homes on acre sized lots. Realtors often post what are called directional signs that may have their logo with an arrow on it and it points the way to the listed home. These are especially useful when the home is nestled in the back of a subdivision and buyers may not be familiar with the neighborhood.  Make sure your agent puts the signs on the route you choose.

Setting a List Price:

This is the biggest thing a seller has control over and it is the buyer that ultimately decides the sold price. Nothing drives up a price faster than being the home every buyer wants to live in.  While it may be tempting to list at the top of the market range that your agent suggests, remember the contest you are entering and start sizing up your competition.  If you price your house too high, you are going to help sell someone else’s home.  Even if your home is bigger, prettier and in better condition than your competition’s it is up to the buyer to see that too and decide that your home has more value to them than the home down the street. There is a psychological component to this as well that should not be ignored.  Let us review how to decide on a list price.

1. Check comparable sales against your home’s features and age.

There is a lot of useful data from the multiple listing service (MLS). Spreadsheets of recent sales in your subdivision will help you compare your home to recently sold homes, pending and contingent sales, and other homes actively looking for a buyer.  Be sure to also look at the percentage of list price to sales price of homes that sold.  The negotiated prices for homes that are contingent and pending are generally not shared by the listing agent or homeowner.

Below are estimated values of common features, but a word of caution against using them – have your agent look at recent data and adjust values accordingly:

  • A half bath, with just a toilet and sink, can add up to $2,500 in value.
  • A full bath, with toilet, sink and shower or tub can add up to $5,000 in value.
  • A bedroom* can add somewhere between $5,000 and $6,500 to the list price.  *The room must include a closet and secondary exit such as a window to be considered a bedroom.
  • A pool will add between $25,000 and $30,000 depending on size and construction – a concrete sided in-ground pool is more valuable to buyers than an above ground pool.
  • Garages and carports will add between $2,500 and $25,000 depending on whether they are enclosed and attached and energized as a full-on man cave retreat.
  • Curb appeal can be hard to put an exact number to, but we do know that it matters – A LOT.  Landscape and paint go a long way to helping to welcome your buyer to their new home.
  • Lot size is also something that buyers consider when making an offer. Appraisers will look at local land only sales and compare sales of homes with large lots to those with small lots to come up with an exact numeric value.  Buyers are not that complicated.  They will pay more for a lot that is useable, desirable, and/or fenced than a wooded lot that is too dense to walk through or enjoy as a food forest.
  • Older homes are less desirable than newer homes by about $1,000 a year.
  • Have you noticed that I have not mentioned price per square foot?  This measure, although widely used among the general public, is not a popular comparison tool used by professional Realtors or appraisers.  There are a lot of variables that go into a home being desired by buyers, and price per square foot is not something that buyers look at first.  Bigger homes will sell for a smaller price per square foot than smaller homes.  It is best used when homes in a subdivision are all identical in age and other conditions and amenities.  It is not an accurate way to gauge value in areas where homes have more diversity, like the Killearn area or rural settings.
  • If you are selling a rural home, there may be few comparable homes for you to gauge how a buyer would value your home.  This is difficult for appraisers too.  Homes in rural areas are appraised at lower than contract value approximately 20% of the time, compared to only 7% of the time in more urban settings.  This is where your agent’s marketing can have a lot of influence.  We have found that homes in rural areas like Monticello, Havana, and Wakulla county need marketing directed at a different buyer and more attention needs to be paid to selling the home to the appraiser than if the home is in located in Tallahassee proper.  This is especially true for luxury homes in the rural areas, there are fewer locals looking for such a property than buyers looking to transplant from another state.
2. What is the age and condition of the roof, foundation, water heater, and air conditioning system?

Even if lenders do not look at the condition of the house beyond the appraiser’s report, insurance companies have a say about their risk of insuring older homes, or older systems.  One of the requirements of having a mortgage is to keep the house insured and insurance companies are not insuring homes with an older roof – even if it is NOT LEAKING. Insurance companies are also looking at the age of the hot water heater.  If you have an insulation wrap or a jacket on your hot water heater, make sure you can still see (or can easily get to) the plate that provides the serial number.  This is how the inspectors (insurance and otherwise) will know how old the hot water heater is and anything older than 15 years should be replaced.

Another note here about repairs.  Many buyer's agents will recommend that the buyer receive a financial credit for the repair at closing rather than trusting the seller to pick the contractor and follow through on completing the work.  This is preferred since the buyer is the one that will be living with the results of the repair.  Sometimes, buyers do not have the cash or reserves to complete the repairs and will ask sellers to have it done.

Most buyers that say they want a fixer-upper, really only want to do cosmetic stuff like new paint and flooring and maybe new countertops. Those buyers willing to put on the new roofs and install new air conditioning systems will not pay the seller top dollar because they are going to want some value for their sweat equity.  Let us say the roof is old and needs replaced, and a roofer has quoted you $10,000 to replace it. Most of the houses in your the neighborhood are selling for $200,000 and have roofs that are less than 5 years old.  You can list your house for $190,000 and in a strong seller’s market you may still receive offers for full price.  However, most buyers DO NOT want the hassle of having to put on a new roof.  Most of the time, the buyers are going to put a price tag on their hassle and offer $175,000 to take on the worry and cost of a new roof installation.  Major repairs will turn buyers away.

3. How much inventory is there on the market?

In order to guess which way the market is trending, agents watch the saturation level of houses.  By dividing how many homes sold last month by the total number of homes on the market, you get a number that represents the months’ supply of inventory level.  In Tallahassee, this number has been dropping since June 2008 and last month, February 2021, we had approximately 1.8 months of inventory.  This is the most extreme seller’s market we have seen in two decades.

In a seller’s market you can ask for more than market value for your home and might still have competing offers within days because there are so few homes available, there are many buyers competing to win them. Most subdivisions have an average days-on-market below 90 days going into the spring of 2021.

In a buyer’s market there are more sellers trying to sell their homes than there are buyers to purchase them. This will cause prices to bottom out and drop.  In a buyer’s market the competition is stiffer for home sellers and they may need to put more work into the home before they list it.

4. Small things add up.

It is entirely possible to put your home on the market with little or no prepping.  Maybe you feel that you have kept up on the maintenance and do not have the time nor the inclination to make any changes to your home.  Maybe there are only small cracks in your ceiling, and the carpet has a worn spot near the doorways, but only one window is fogged, and just a few of the light switch plates are yellow-aged brittle and broken, and… etc. If the buyer sees your place as worn or tired, they will wonder what else has been neglected.  They will worry that there are unseen problems that will only surface after they have signed the loan documents and their will price their offer accordingly.  Buyers are looking for anything that they can reduce from the listing price.  Take as many things off that list as you can so you can earn as much as possible. Here is the thing to understand about the buyer’s mindset as they walk through your home looking at all these small items that need to be address and adding up their costs, the value the buyer takes off the list price has little to nothing to do with the actual cost of repairing or replacing the item. They are adding their hassle and pain and suffering to an unknown contractor’s number that has little basis in reality. Your agent can walk you through your house and help you see it with the eyes of a buyer. Replace the worn and stained carpet rather than offer an allowance. Paint with light neutral colors (but not white). Replace leaky faucets.  Replace fogged windows.  Replace light switches and door pulls on cabinets – it makes a huge difference!  Start with any safety or code violations since most buyers will have a home inspection.

Condition and Amenities:

Remember all those things you promised to ‘get to’ at some point? Well, my friend, now is the time to get the list out and start knocking things off.  According to Freddie Mac, over a third of homeowners say they have been putting off a major project for a year or more.  Homes need constant maintenance and sellers do not even see much of the dinginess until they start to pack up their stuff.  No matter what condition your house is in, you have three basic options:

1. Make no changes and sell the house ‘as-is.’

Agents often put in the confidential notes of a listing that the seller is looking for an ‘as-is’ contract.  That means that the seller does not want to be responsible for any repairs. Often the sellers are older, or not local, or are not in a position that they can promise to pay a contractor if the sale of the house falls through. In Tallahassee, this does NOT relieve the seller of the responsibility to disclose all pertinent information to any potential buyer.  Any information that is ‘of value’ needs to be disclosed. Realtors will ask you to fill out a property disclosure and you are legally required to disclose any material defect in the house.  If you are unsure whether something should be disclosed or not, disclose it. Per Florida law, you are not required to disclose to buyers if there was a homicide in your house. One might consider the dangerous chemicals of a meth lab something of value, but the agent may not have experience to know how to check.

?Storytime: a couple relocating to Tallahassee to take positions at Florida State University were looking at a handful of upscale neighborhoods.  They particularly loved the Betton Hills area and were thrilled to find a beautiful home available on Trescott Drive.  Locals knew that the home was the site of the murder of an FSU law professor who had been shot execution style while in the middle of a particularly nasty divorce.  Even though not required, we shared an article with the buyers letting them know what had happened in the house. We did not want to scare them away, and while we did not feel the murder had tangible value, the buyers would have learned the history of the house eventually. They did decide to look elsewhere since the circus surrounding the case was beginning to heat up again with the trial.  It is possible to go down to the police station and have them print off their history at a given address in Tallahassee.  Tallahassee also has an online crime map that has historic data that can be checked as well.

Even if you do not want to make any repairs or renovations to the house, you may want to consider investing in some small items that can help you net more in your sales price – some for only the cost of elbow grease. Here are some costs we are asked for regularly:

  • Deep cleaning – hire a professional to clean the windowsills, fans, baseboards, etc. In Tallahassee this type of cleaning can run $15-$20 an hour and cost $150-$500 for a 2,000 square foot house.
  • Declutter – a professional organizer charges between $200 to $700 to give you plenty of suggestions. Or you can take 10 hours and storage containers and start packing and stacking.
  • Landscaping – hiring a company can run you between $12 and $30 an hour plus the cost of the plants and materials.  Plants are inexpensive and if you do it on your own, $500 will go a LONG way.
  • Carpet shampoo – renting a cleaner for a day or two will cost between $30-$50, or you can call the professionals who will charge around $150 per room.
2. Make low cost, cosmetic fixes only.

Maybe the roof is at the end of its life, and the air conditioning system is not as cold as it used to be, and the kitchens and bathrooms have not been updated in 25 years. Considering that and the worn look of the house a potential buyer may think they need to spend $50,000 to $100,000 to remodel the house to get it where they feel the neighborhood standard is, and so maybe it makes sense to look at some other items that can be addressed to help the buyer feel the remaining items are more manageable.

  • Repaint the interior.  This will cost between $1,500 and $4,000 for a full interior freshen up.
  • Replace faucets.  The seals get old and leak and replacing them costs around $200 each.
  • Hot water heaters.  Another thing that insurance companies are looking at harder, this one is relatively inexpensive, costing approximately $500-$700 to have a plumber replace it.
  • Replace outdated light fixtures. Running approximately $70 - $150 a fixture, have an electrician handle the wiring.
3.  Invest in major repairs or renovations.

It does not make sense to completely renovate the home in most cases but replacing the roof or the heating and air conditioning system may lower monthly costs for buyers and make your home more appealing to buyers. Insurance companies like new roofs and often offer rebates on yearly homeowners insurance. Here are some common costs of repairs:

  • Replace the flooring.  This will run approximately $3-$5 a square foot, so somewhere between $6,000 and $10,000 for an average home.
  • Replace dated appliances with energy efficient models.  Depending on the make and model, these will cost between $2,500 and $4,000 for stainless steel appliances and installation.
  • Update bathrooms.  Depending on size, these projects run between $12,000 and $25,0000.
  • Update kitchen.  These can range from $30,000 to $80,000 for a full update.
  • Replace the roof.  Prices go up as you count the number of valleys in your roof.  In Tallahassee, the average roof replacement is between $6,000 and $12,000.
  • Replace the air conditioning system.  The entire system will run between $8,000 and $20,000 depending on the tonnage of the condensing unit (outside unit that cools the air).

A note to those intrepid do-it-yourselfers.  Even if you are doing the work yourself, YOU STILL NEED A PERMIT IN TALLAHASSEE!!!  If you are doing the work to list it, hire the professional and put the liability of the product on them and not yourself because one wrong move and you will be defending yourself in court and that will take away any of the savings for doing it yourself.