Every piece of real estate in the country is already priced. It is priced right now. This minute. How? The market has set the price. It is the maximum that a ready, willing, and able buyer will pay for the property.

A good listing broker's job is not to create a price. No, it is to “find” the price. To list the home at the highest figure possible. In that way, a seller can get the maximum return on his or her investment, while the buyer is still able to get a reasonably priced home.

How does a good listing broker “find” the home's correct price. Through comparables and competition.

Initially, a check of comparables is made. A hard look is taken at similar sized and built homes within just a few miles of the subject property which have sold within the last six months to a year. What is the general range of sale prices? If certain numbers emerge from each transaction, a pretty good idea of the right price for the subject home becomes clearer.

Next competition must be checked. Are similar, currently listed homes priced higher? Lower? Or about the same? (Looking better than competing listings in the eyes of buyers is always a good thing.)

Price: what doesn't matter

What an owner paid for a home doesn't matter. Why? Well, what if the owner got a good deal on the home? Does he have to sell for just slightly more than what he paid? Of course not. What if he inherited the home, and thus, paid nothing? Do they have to give it away in turn? Of course not.

What an owner owes on his home doesn't matter. Why? Buyers won't pay more just because the home is over financed. Otherwise, homeowners could run out and borrow more against their home to “pump up” its value.

Any improvements an owner has made doesn't matter either. Why? A few specific improvements may increase a home's value—to a point. After a certain threshold, though, improvements just become extra stuff. Will a buyer pay more because four extra bedrooms were added to a house? Of course not. Will a buyer pay more because a second kitchen was added? Of course not. That is called “over improving”. And while a small home in need of repair in a big neighborhood may be a different story, adding to a standard home in a standard neighborhood often doesn't help.

Price: what does matter

The market, the competition, and comparable sales are what determine the right price.

Do homes always see their values increase? In our area, generally, yes. Although periods of high unemployment, economic trouble (local and national) will have a bearing on home prices, at least for the near term.

Price: why it matters

Buyers conduct their home search around price. Their Realtor® searches the market based on price.

Please note the graphic below. It is a screen shot of the local Multiple Listing Service (MLS).  The one Realtors® use.

Note the search methods offered. Besides boxes for bedrooms, baths and square footage, it comes down to location and, at the top, price. (It's circled.)

Price also matters because it determines the number of buyers currently looking. There are far fewer buyers in the market for an over priced house than for a well priced home.

Note the graphic below. See how buyers dry up as the price rises?

The graphic above also illustrates the power of price reductions. Think of a price adjustment as dropping the home price down to a lower section of the pyramid, where more buyers are shopping. So, if the wrong price was picked at the start, it is not the end of the world. Adjust the price promptly. Before the listing gets stale.

One more question...

Will brokers take an over priced listing? Many will. Why? Because they work with buyers too. Once they show an over priced home to buyers, and those buyers realize it is over priced, their next question goes something like: “do you have any other homes you can show us?” Then the competition pours in. Be firm about the right price. Contact me, Joel, if you have any further questions about it.

In meantime, remember, price matters. Price is the key. It sells a home more than anything else.