Determine the Listing Price
You learned about comparative market analysis and other methods of real-estate valuation in Chapter 7, but now you have to approach pricing from a seller's standpoint. You'll have an agent to help you make comparisons — pay attention to the agent's recommendations. That doesn't mean you let the agent dictate the price, but do listen to the reasons given for pricing strategies. There are always unique properties that will sell for more than market value, but that scenario is not the norm. Your property is worth what it's worth — period. Pricing it too high results in fewer showings, especially after word gets around the agent community that it's overpriced. Why would a buyer pay you more for the property than it's worth when she can get more features in a home that's realistically priced? It rarely happens.
Even if you do find a buyer at the inflated price, the property will probably have to appraise for at least the sales amount. Banks require it, and cash buyers typically insert an addendum in their offer that states the property must appraise for at least the amount they are paying for it. You'll have to negotiate downwards at that point to make the sale, so don't waste your time marketing the property at a seriously inflated price.
Buyers often submit extremely low offers for overpriced properties. The mindset seems to be that if the seller is so clueless about pricing, it's okay to make an offer that goes in the other direction, as a sort of “So there!” response. Be realistic, and price the home right to begin with. It will sell in a shorter amount of time, and your cash flow will flourish, allowing you to move on to the next project.
Some sellers like to negotiate, so they prefer to keep the price way up there to allow for that. Don't! It just doesn't work. When buyers and their agents start comparing prices to features, the MLS sheet for your property will go in the trash can. Don't try to compete with properties that have a higher market value — yours will come up short by comparison.
How Much Do You Really Need?
You probably planned a target sales price when you purchased the property, but now that it's time to sell, you should evaluate the situation again to determine the least amount you would accept from a buyer. Use a software program or a plain sheet of paper to list the expenses related to your investment and to closing a sale.
Existing mortgages
Commission expense
Projected fees for attorneys, title work, excise tax, recording, and other seller expenses specific to your area
Taxes and assessments, property association dues, and other fees associated with your ownership for the year
Total your projected expenses. How does the market value of the property compare to your costs of selling it? If it's not as much of a profit as you'd like, are there ways to increase market value without spending a great deal of time and money? Ask each agent you interview that question to see if they have recommendations.
