Q: How does a Real Estate Broker price a property for sale and why is it sometimes a different price than on an appraisal?

A:  As a local Realtor®, I can tell you that the question of price is at the forefront of every Sellers’ mind. Price is often a determinative factor in whether and when a property owner decides to sell.  What do you think I can get for my property? How do we determine the best listing price? Why do online programs give me a different price? Why did my lenders’ appraiser give me or my neighbor a different amount? These questions are almost always asked by interested sellers, as they should be.In a Sellers’ market, as we are in today, it is easy to get carried away and believe that your 1-bedroom 700 square foot condo will sell for $1M.  Well, here in Silicon Beach, it just might.  However, it’s important to understand not only the number, but how your property is valued. Let’s start with automated programs- we have all gone online, entered our address, with the promise of finding out “how much your home is worth”.  The results can widely vary, from fairly accurate to wildly inaccurate.  If you know how to review the findings, though, this can be a good place to start, with comparable sales being the primary of the following three criteria used for setting price!

  1.   Comparable sales are critical to any determination of value.  When using an automated program, it will pull property sales within a certain radius, and sometimes with certain key attributes, such as number of bedrooms, etc.  Nonetheless, it will generally include a mix of sales that may or may not be legitimate comparables for your property.   For example, condominiums in large complexes in the Silver Strand area of Marina del Rey may not be accurate indicators of value for condominiums in smaller complexes on the Marina peninsula.  Neighborhood factors, such as east vs. west of Lincoln or north vs. south of Washington will not be considered by the program. With basic knowledge of your neighborhood, you should be able to pick out, which “comps” do not belong, and pull them out of the analysis.  You’ll place more reliance in the sales of properties more like your own.
  2.   Property Features and Condition are really the key elements necessary to translate those comparable sales into a custom price analysis. Although a knowledgeable real estate professional can provide this analysis for you, I always like to educate my clients so that they can understand and evaluate for themselves. This part of the pricing exercise is a subjective one in many respects. These are elements that will not appear on a spreadsheet (although an appraiser may itemize and assign value to some of them).  Specific location, view or lack thereof, state of repair/condition, green or smart features, school district, yard, curb appeal, and style – these are just some examples of features that are used to compare your property to the known sales prices of others.  An appraiser does make adjustments for many of these factors, but one that is not familiar with the neighborhood or with what is important to buyers may be off on these more subjective value assessments.
  3.   Market Demand is the last piece of the puzzle, and comes into factor in strategizing the listing price.  This is important and generally it is best to take professional advice. Real estate professionals will apply their actual knowledge of the current market – how many buyers they know are looking, especially in your price range or for your specific type of property, and the current availability of properties to choose from.  These factors change regularly, and a few new listings on the market may well change your pricing strategy.  For example, did you know that there are only 3 condos for sale on the Marina Peninsula under $2M, and that those do not have the ocean views so coveted by buyers? If you are a seller in that price range, you are going to expect a premium if you are in that price range, and especially if you are lucky enough to offer a view. Do you know that remodeled, contemporary design is highly sought after in our Silicon Beach areas? From Westchester to East Marina del Rey/Arts District to Culver City and Playa areas, buyers are paying premiums for turnkey properties with modern taste. If you have remodeled, you are in luck. If you have not, there is still opportunity for you – with younger buyers moving into these areas, they can be shown the vision and still bring you a premium for a property that has such potential to increase value.

 These factors all are considered when valuing and then pricing a unit for sale. Price unrealistically, without proper consideration of these factors, and buyers may stay away. Pricing too low can disappoint buyers who don’t want to engage in a bidding war.  Take into consideration that your property may be worth more on the open market, due to factors 2 and 3, than would be apparent in an appraisal, and be prepared to justify your price. I’ve sold many properties where the appraisal came in significantly below sales price, even though we may have had multiple offers at that purchase price. A knowledgeable professional will help you and your buyers anticipate and overcome that hurdle. The market does always speak. In this Sellers’ market, if you are priced appropriately, you will sell your property in a relatively short period, sometimes with multiple offers.  If it’s priced too high, the market will be silent. Keep your ears and eyes open, consult with professionals, and be smart in your pricing, so you don’t miss the best seller opportunity in our lifetime! Good luck out there!

 

Disclaimer: This article is intended to be primarily for entertainment purposes, and is not to be considered legal advice.

ABOUT LISA PHILLIPS, ESQ./ CA Bureau of Real Estate Lic# 01189413

Lisa Phillips is an active Realtor® in the Los Angeles area, with more than twenty years as a Real Estate Broker and attorney. Lisa is also a member of the National Association of Realtors “Green Resource Council”, and achieved its “GREEN” Designation. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly to achieve the best results for her clients. For more information, please visit www.LisaPhillipsRealEstate.com.