Whether buying or selling a home, a high quality marketing program specifically designed for the particular property is the key. No matter how great (or how weak) the market, homes for sale need to be more than put on a list. They need to be marketed. The same for buyers: Seller's market or buyer's market, or "balanced" market, sellers need to want to sell to their buyers. So buyers need to be marketed as well. Essential to doing either is to understand the value of the property in question.
There's more, of course, but value and price are at the center. It's easier to overprice a home than to underprice it. If the price is just a little too high, there won't be many, if any, takers. Everyone knows real estate prices are negotiable, but most people don't really want to get into it hot and heavy. On the other hand, if the price makes it seem like the home is a good value, there will probably be takers. Once they're in the fight, few want to walk away as long as it doesn't get too rich for their blood.
Sellers need a good pricing strategy. Buyers need to know they're not overpaying. If the market's really, really hot, well maybe overpaying a little isn't so bad: the value will go up in the course of the coming year, and then the buyer will be in good shape.
Of course, if the buyer's offering to pay too much, then the lender may well balk. Then it really gets complicated.
So value is critical. If you're the seller, you need to set the price right. As I've often said, List Price is not an announcement of how much the seller wants, it is the first step in a marketing strategy caluculated to get the price the seller wants. If you're the buyer, don't expect deals, but be ready to pay the fair market price.
All this means that, buying or selling, you need an agent who understands value.
The National Association of Realtors(r) recently introduced a new certification: Pricing Strategy Advisor. "The Pricing Strategy Advisor (PSA) certification" says the NAR "is specifically designed to enhance your skills in pricing properties, creating CMAs, working with appraisers, and guiding clients through the anxieties and misperceptions they often have about home values." Right now, there are only about 37 PSAs besides me in Massachusetts. Less than a handful are In my market area, which is centered on Winchester, Massachusetts and the surrounding areas.
So what does a PSA do to determine the value of a property? This is really a matter of looking at details more than anything else. There are certainly agents or brokers who do their pricing work diligently. Like everything else, it's easier to find them, though, if they're labeled with the PSA certification.
The sub-title of the PSA course is "Mastering the CMA." The CMA is the "Comparative Marketing Analysis." It is well-established that the preferred way to figure out the fair market value of a property is see what the market has recently paid for similar properties in the same location. Key terms are (1) recently – how recent is that? 3 months? 6 months? 1 year? Longer? (2) similar – how similar? Identical? Close? (3) location – Obviously not exactly the same location, but close. How close? Same street? Same neighborhood? Same town? ¼ of a mile? ½ a mile? 1 mile? More?
Just how much flexibility lies in these terms depends in part on how much market activity there's been. If there's no exactly identical property next door, then similar and location get a bit more flexible, as does the time issue. Fewer comparable properties, the more flexibility and the more it depends on the broker's understanding of the market and the area. The kind of area makes a difference as well – urban, suburban, rural.
The PSA process goes well beyond the usual CMA. First of all in depth of understanding and second of all in detail. Two properties might each have a kitchen, but one kitchen may be of considerably higher value than another. More or less modern, more or less new is fairly easy, but more or less fashionable? Maybe a little tougher, requiring more depth of understanding. Part of it, though, is to understand marketing possibilities: maybe a lemon can be turned into lemonade, reducing the impact on the value?
Who knew mature judgement might be required?
One of the important ways the PSA training goes beyond the typical CMA is in ranking the quality of the rooms themselves. Talk about judgement and experience! So the comparison goes beyond numbers and a few features to a more complex, overall ranking of the quality of the home on a room by room basis, allowing for a more subtle consideration of a home's place in the market.
In the course of the comparison, we look at those comparable solds, we look at the competition on the market at the moment – in a sense, shelf placement. We look at the size of the lot itself, we look at the square footage of the home, the style of the home, whether there's a garage, a deck, a porch, a master bath, and so on. Issues like solar panels (a whole separate category), sky lights, sump pumps. The kind of foundation.
There can be aesthetic issues: I listed a home that had a field stone foundation, which was OK with everybody, but there was also a ledge intrusion projecting into the basement. It posed no practical problems at all, but it created problems in the minds of buyers just because it looked intimidating, even though they had no issue with the fieldstone foundation itself, which does inherently pose practical issues.
A CMA performed by a PSA should be more detailed, more in depth and more detailed than a typical CMA. I always generate a sales comparison report, then a valuation workbook as a basis for my CMA. That's a lot of detail, but it's worth it when you've sold a listing within a week of coming on the market, or you've gone into an offer for a buyer client with a clear idea of what the fair market value of the property really is.
Whether you're the seller or the buyer, you have the comfort of knowing what you're dealing with, and you have the basis for a strategy. Why wander in the dark when you can have a broker who knows how to turn on the light? Make sure you're working with not only a Realtor(r), but a broker who is a certified PSA. You will appreciate the value.