Four Tips to Help You Accurately Price Your Home in TodayÂ?s Market

By: Jeff Hammerberg

An unrealistic asking price may impede the sale of your home. But undermining your profit margin is also unwise. Pricing your home accurately ? especially in the middle of an entrenched buyer?s market ? is always a bit challenging. But if you?re trying to sell a house or condo these days, intelligent pricing is critical. Those who are off the mark by a slight amount may wind up off target completely in terms of attracting a qualified and interested buyer, and those who price their home unreasonably high may be shooting themselves in the proverbial foot.

Here are four tips for figuring out how to price your property, without ?leaving money on the table? by selling yourself short:

Know Your Primary Motive for Selling

Understanding why you want to sell is the first step, and the most important. If you are selling to capture capital gains, for example, your strategy regarding pricing will be much different that if you are selling to move to a new job in another city. Those selling to avoid imminent financial problems, for instance, may need to price their house lower ? and sacrifice some of the proceeds ? in order to inspire a faster sale. If you don?t need to sell by a particular deadline, you can afford to price your house at the high end of the spectrum and ?fish? for a while for an interested buyer. After a couple of weeks you can adjust your price lower if you aren?t attracting enough interest.

Find Out What Buyers are Paying for Houses like Yours

To find out what buyers are paying for comparable houses, have a Realtor print out a market report that shows recent sales data for nearby homes with similar amenities and square footage. Compare the asking prices to the actual sales prices, to find out if other sellers have been pricing their houses too high. Accurate pricing usually reflects a gap of no more than 10 percent between what is asked and the final price. Study the “time on the market? data, to see how long it takes houses to sell. If they are selling faster than average, it may be because they are priced below average. If they stay on the market longer than normal, it may indicate that they are overpriced or need repairs that are not discounted from the price.

Price it Objectively

When housing prices are falling steadily it is easy for sellers to cling to a false sense of what their properties are really worth. That?s fine if you are just testing the waters, but it can be counterproductive if you intend to sell within a reasonable amount of time. Take the average price per square foot you gathered from your data analysis and multiply it by the number of square feet in your home to find out what the market?s average valuation for your house happens to be. Add value for extraordinary features like a new kitchen, a garage apartment, or an oversized lot. Subtract for such things as needed repairs or peeling paint, less bathrooms than other comparable homes, or heating and air conditioning systems that will soon need to be replaced.

Be Decisive

Decide ahead of time what constitutes a reasonable offer to purchase. Knowing what your bottom line final price is will help you make quick, clear decisions under pressure. Establish a price range that you consider acceptable, and if you aren?t getting results, be prepared to lower your price at strategic intervals of time. A good way to plan ahead for price adjustments is to create benchmark dates on a calendar. If you reach a benchmark and have not gotten the results you expected, be decisive and businesslike ? not emotional ? about changing your price. Be ready to recognize if the time is not right for you to reach your goals. Trying to sell when you aren?t convinced you?re ready to can be frustrating and will likely cost you more money in the long run. It may be better to wait for the market to rebound, perhaps leasing your home or taking out a home equity loan to tide you over in the meantime.

Another important thing to keep in mind regarding pricing is that buyers and Realtors search the MLS database using specific price parameters.

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For example, if you hope to attract buyers who are shopping for homes within the $250,000 - $300,000 range but your home is priced at $315,000, you may be pricing yourself out of your target market. Similarly, if you are asking $300,000 for your home you may be connecting with a whole pool of buyers that wouldn?t find you if you were priced at $301,000, because they are only searching up to the round number price of $300,000.

To save time, money, and effort when buying or selling real estate, visit www.GayRealEstate.com and www.GayMortgageLoans.com. Or call toll free 1-888-420-MOVE (6683). They are dedicated to superior service to the GLBT community.

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Upgrade Your Selection of Offerings to Expand Profits
By Donald Mitchell

Most business leaders think about selling more items or services. When is that a good idea and when not?

Done properly, selling or providing more of what you already offer can be a big help in creating efficiencies. But sometimes you are serving virtually all of someone s needs for those items.

The application to a for-profit organization is obvious. What else can you profitably sell or provide at a fair price with desirable qualities and service that the customers you already have want to buy? The advent of the Internet makes this evaluation much more potentially rewarding because postal, air freight, and electronic delivery choices enable you to serve most of the world with your added offerings.

This for-profit challenge requires considering the potential volume and the effects on overhead costs and profit contribution margins. Example 1 shows the profit effect that a positive change in volume can make when you grow through more profitable items that do not increase overhead costs very much.

Example 1: Adding More Profitable Items to Expand Revenues Without Increasing Overhead Costs as Rapidly Further Speeds Profit Growth

This example shows the profit multiplying potential of increasing profit contribution margins from 30 percent to 40 percent while decreasing corporate overhead costs from 20 percent to 3 percent of revenues. The result is a 7,700 percent profit solution. If revenues could be grown even more, a 40,000% improvement (a 2,000 percent squared improvement) could result.

Annual Pro Forma Financials Before Volume Expands

Revenues $1,000,000

Cost of providing offerings $ 700,000

Profit contribution $ 300,000

Corporate overhead cost $200,000

Pretax profit $100,000

20 Times Volume Increase with Higher Profit Contribution Products and Limited Additional Overhead Expenses

Revenues $21,000,000

Cost of providing offerings $ 12,600,000

Profit contribution $ 8,400,000

Corporate overhead cost $ 600,000

Pretax profit $ 7,800,000

The challenge in making such a change is to focus on both higher profit contribution offerings and keeping overhead and operating costs low. The profit-harming mistake that many make is to only look at the contribution percentage. When that happens, the gains in profitability may be eaten up by new costs to deliver the added offerings that more than offset the profit contribution of those offerings. Exhibit 2 quantifies that point.

Example 2: Adding More Profitable Items to Expand Revenues Hurts Profits When Overhead and Waste Costs Grow Too Rapidly

The potential profit gains from higher profit contribution percentages (going from 30 percent to 40 percent in this example) can be more than offset if waste and overhead costs grow too rapidly in providing required items. Perishable, high-tech, and fashion items often have this problem as time causes value to decline, resulting in waste or markdown charges. Higher profit contribution offerings are likely to increase the administration and service costs that support them.

Annual Pro Forma Financials Before Volume Expands

Revenues $1,000,000

Cost of providing offerings $ 700,000

Profit contribution $ 300,000

Corporate overhead cost $200,000

Pretax profit $100,000

20 Times Volume Increase with Higher Profit Contribution Items and Faster Growth in Overhead and Waste Expenses

Revenues $21,000,000

Cost of providing offerings $12,600,000

Profit contribution $8,400,000

Added waste and markdowns $3,150,000

Corporate overhead cost $5,200,000

Pretax profit $50,000

How can these mistakes be avoided? Begin with small experiments where you can measure the increases in volume, profit contribution, and costs before committing to a major change in your business model.

Copyright 2007 Donald W. Mitchell, All Rights Reserved

Donald Mitchell is chairman and CEO of Mitchell and Company, a strategy and financial consulting firm in Weston, MA. He is coauthor of six books including The 2,000 Percent Squared Solution, The 2,000 Percent Solution, and The Ultimate Competitive Advantage.

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