Pricing a Remodeled Property
Published on 11/27/18 by Michael Moore
In one of my other posts I went over the scenario of pricing a home that was challenged. This time I wanted to cover the psychology of pricing a property that has a lot going for it.
In a balanced market, like one we currently have at the time of this writing, it is still paramount to price even a freshly updated property correctly so that it sells sooner than later. Sometimes sellers are tempted to jack the price way up because they have put some good money into revitalizing and modernizing the property. I am all about getting a good return on investment. I am happy that people renovate properties. I like fresh and updated verses classically dated.
Renovated homes typically get a lot of attention and they command a better price. Yet, pricing it too far outside of market value lets the property sit on the market unnecessarily. Will it sell and get a good price? Eventually sure, as long as it doesn't have a wonky lay out. A home can be refreshed and modernized, but if the floor plan is strange, people will still avoid it. Most likely, a renovated property, even if well overpriced at first, will sell in due time if the agent can get the seller to give the price a haircut in due time. Why take that time and risk leaving money on the table?
If the seller is concerned about maximizing profit, there is a way to get buyers engaged psychologically, cough up a bit more money, and sell the property in less than a month. Not that it is popular in all states or given areas where the house is. This way is to put the property on the market, advertise it well like agents do, but not accept offers for at least a week. Huh? Isn't that unfair to whoever gets in first and makes an offer first? No it isn't. The seller does not owe anything to prospective buyers that way. If anything, it is more fair to all the other buyers out there; plus a seller should get the best offers.
When a property is priced fairly to begin with, but no offers accepted for a certain amount of time, this stirs up the interest in more buyers. It is good to have one or two offers within the first several days of a nice house going on the market, but I always think it is better to have eight offers, with at least three of them really working hard to be the winning bid. Doesn't a nice property get two or three good bids even if the sellers doesn't hold off accepting offers for a week or so? It happens, but in my experience, these offers do not go up as much as when a broader spectrum of buyers has been able to go through the property.
I'm not one to artificially over-inflate the market by playing on the psychology of buyers and sellers too much. I am about maximizing profits while giving the maximum number of buyers a shot at the nice property they have been trying to get for a while.