How to Price Your Home to Sell

On one of my first trips back to California after living in Mexico for several months, I was talking about life and the way foreigners behave in Mexico. I recounted how some gringos drive cars without wearing a seatbelt or ride motorcycles without helmets. My daughter-in-law, a mathematician, asked, “Do they think the laws of physics change when they cross the border?”

And so it goes with real estate in Mexico, especially when it comes to pricing your house for sale. While some aspects of the real estate transaction are different, such as the appraisal and closing process, the laws of the market, like the laws of physics, do not change at the border.

Pricing your house in the stratosphere has the same consequences in Mexico as pricing your home too high in the US or Canada; no buyers.

What makes a market anyway? Well, goods for sale and people to buy them, also known as “supply and demand.” Even when the supply gets short, people are wary about paying too much and will compare prices. These are the educated consumers.

The educated consumer of Mexican real estate has a pretty good idea of what a 3-bedroom, 2-bath home with a pool should sell for. They know that beachfront properties are worth more than those not on the beach. And they know that view properties have more value than those without a view. And they know that prices in Mexico are falling just as home prices in the US and Canada have dropped.

All of us have heard that the three most important words in real estate are “location, location, location.” Well, here in Southern Baja or any part of coastal Mexico, that translates into “beach, beach, beach.” If your house is on the beach with an unobstructed view and access, it is usually worth twice what the home behind it is worth. That is the way the market works worldwide.

So now you want to sell your home. You have decided to go back to the old country or move to another part of Mexico or the world. You have been shopping the Internet looking at homes and you found an area you like. The homes in that area are selling in the $200,000 range. The market is depressed, sellers are motivated. It is a bargain. Of course, you want to sell your Mexican home to buy the bargain property.

Wrong Way to Price a House #1:

To snap up that bargain for cash, buy a car, furnish the house, and have a cash cushion, you want to net $500,000 from your Mexican property. So you do some math and decide your house must sell for $600,000. So you call a real estate agent and invite her to look at your house. You tell the agent, “I want US$600,000 for my house. I have $300,000 invested in it, and I have a lot of rustico furniture, and I need to net $500,000 to move to my next place.”

Sounds reasonable doesn’t it? This is as far from the proper way to price a house as using butter to treat a burn.

The Right Way to Price a House:

A good real estate agent is going to stop you in your tracks, sit you down, and explain the market to you. What you have invested in the house, what you want for it, and what you need from it, are not valid market indicators. What sets market price is the price of similar properties in similar neighborhoods that have recently been sold or listed. This sets market price―nothing else. This is called comparative pricing. The other properties are called comparables or in real estate jargon “comps.”

In Mexico, getting good comps is difficult. There might be one or two houses in a neighborhood that have recently sold or are on the market. If these houses are of good quality and design, agents will use them as a basis to compare your house and others that are on the market. Your house may be higher or lower, based on the quality of the finishing or special amenities. But don’t put too much value on your furniture. If you are selling and leaving the country are you going to schlep all that stuff back with you? Most likely not. What could you get for it at a garage sale? Not much, right? So don’t think you can raise your house price much for the few pieces of furniture you prefer to leave behind. In fact, a buyer that will take the furniture off your hands is saving you the trouble of packing and moving or disposing of it.

Wrong Way to Price a House #2:

After the real estate agent has educated you and shown you what the market will bear for your home, you are still being stubborn, so you say, “Well, I hear what you are saying, but let’s price it high and let them make offers.” That’ll work, right? Wrong. If another agent is shopping for a house for their client, they are looking at properties within their buyer’s budget. If your $600,000 home should really sell for $400,000, the agent knows that. She may look at your house online and know it is over-priced. There are so many properties on the market she doesn’t need the hassle of dealing with an unrealistic seller. And that is exactly how you will look to experienced agents. An agent doesn’t know you are fishing for someone to make an offer.

If potential buyers are shopping online and compare your house to others, they will just move on. Very few will consider making an offer $200,000 less than the asking price. So now you have lost an agent and a buyer. Who knows how many other agents and sellers passed on your house?

If your house is worth $400,000, price it at $400,000. Remember, cash is king. And if you don’t have a mortgage on your home, then no matter what you put into the house, you are still walking away with almost 400,000 smackers. That is a nice chunk of change to start a new life. In today’s competitive market, which is flooded with inventory, merely slapping a sign on the property, posting it on a website, and waiting for a buyer, will not sell the house.

The first step to a timely sale is properly pricing the house. The next step is an aggressive marketing plan. Before you list your house, ask your real estate agent to show you their marketing plan―in writing. And finally, clean up your act. Stage your house as if My Celebrity Home was coming to film your house. Sounds like we just set the stage for future columns…

 

 

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Date: Wednesday, 7. September 2011 19:51
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