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Throughout 2013, the real estate market has been incredibly strong with high demand and rising prices. We have seen this across the board in all areas here in Santa Barbara and Montecito and in pretty much every price point.
With the market this hot, what should the pricing strategy be for a seller when it comes time for them to sell their home?
Every seller and every seller’s situation is different with regards to what they are looking for in the sale of their home. With this said, the #1 objective for most sellers is simply to get the highest price for their home. Other key wants for a seller are often selling to a “good” buyer, having a smooth transaction, selling a home close to “as is” etc. So how does a seller go ahead and accomplish this in today’s real estate market here in the Santa Barbara area.
Let’s use selling a home in San Roque as an example of what a seller can do. San Roque is one of the quintessential family neighborhoods here in Santa Barbara where many people love to live for many reasons (character homes, sun, well liked school, family feel etc.) and the demand for a good home is very strong.
The 3 basic pricing strategies would then be:
- Price your home high and see what the market will bring you
- Price your home at market price
- Price your home low and see what the market will bring you
Strategy #1 – In a hot real estate market such as we have today, the first strategy can work. The demand is so strong that a seller can often get higher than the current market value simply based on where the market is at….high demand, low inventory, low interest rates. If a seller is wanting to go this route, they would definitely want to do this in a market such as we have today.
The cons to this approach are simply that the seller might not get their price and often when they do not, the home quickly gets lumped into old inventory. Here you can find yourself in a situation of needing to reduce the price of your home. If it then does not sell after a price reduction, the seller is in a very tough position and most likely will have lost more $$ than if they priced their home simply at market value. Also, when and if you do get into escrow, the buyer in general will have the upper hand on any negotiations since they know that the home has been on the market a while.
Strategy #2 – This is the most common strategy in general and also what many people are using today. It is a fair value for the home and with the market being as strong as it is, a seller will most likely get their price and often a little higher. It also lends itself in general to a good escrow where buyer is happy to have gotten their offer accepted and most likely will not try and ask for any unwarranted request for repairs etc.
Strategy #3 – This is in general the least used strategy, but one that we have seen a lot more of here in the last several months. The cons of this strategy are obvious. A seller prices their home too low and there are only a few buyers out there and the seller ends up getting offers only a little over their low asking price. The negative here being the seller simply could of “left money on the table“.
In today’s real estate market, there is such high demand for homes in areas such as San Roque, especially in the entry level price point ($650,000 to $799,000), that this strategy is almost certain to have the home be bid up in value to market price and often over. The other major pro with this strategy is that the seller will have a good pick of what offer they want to accept and therefore have the upper hand. They can sell pretty much on their terms…price, length of escrow, “as is” etc. Buyers of such properties also tend to be very happy to have gotten their offer accepted that the escrow ends up usually being very smooth.
Here is a recent example of Strategy #3. I just listed 2948 Ventura Drive in San Roque for $649,000. Market value was much higher and the seller knew this. By listing the home at a lower amount:
- The seller was able to sell their home in 1 day (a big plus for them)
- The seller received multiple offers and was able to choose the best one
- The seller received an offer much higher than their asking price and it eventually went up to a market value price
- The seller had a very easy smooth escrow with very little disruption in her life
If you have any questions about pricing, the San Roque real estate market in general, please let me know. I would be happy to be of help.
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For information on Real Estate here in Santa Barbara, Montecito and/or our surrounding areas, as well as any other aspects of life in our area, please don’t hesitate to contact Kevin Schmidtchen at Sotheby’s Int’l Realty.
Thank you for reading. I hope you find Santa Barbara Real Estate Voice informative. Please feel free to contact me or comment below with any thoughts.