Price Your Properties Aggressively
By Paul Esajian on January 27, 2014
As an investor, you may think that the quality of your work and the changes you make to a property will impact how quickly it sells. Sure, quality and craftsmanship are important, but the most important feature about a house is the purchase price. You can have the nicest property in the best location, but unless the home is priced right, it will probably sit on the market for a long time. Just because you put in a lot of time and effort to make the house look great doesn’t mean buyers will overpay for the property. Price is still the most important feature.
Most buyers don’t know or don’t care about the great work you put in. More importantly, they don’t care about the condition it was in before you bought it. They want to know what their monthly payment will be and whether or not they can comfortably afford it. If you overprice your market, you will be left wondering why the property has gotten minimal offers and showings over the past few weeks.
It is important to keep this in mind as you are doing any work or thinking about your exit strategy. You may have every right to list your property at or even above area sales, given the work you put in and the location of your property. Even though this may be the case on paper, buyers will always look for the lowest comparables and base their offers off that. You have to factor this into your rehab budget and plan for this when you list. There is a chance you can get your full asking price, but there is a much greater chance it will sit without any offers if you list too high.
As you are planning to list, you should keep an eye on the market and what interest rates are doing. The higher your list price, the less rates have to go up to have an impact on your payment. If your property may be suited for an FHA buyer, you should get in front of this and make any required repairs before you list so you don’t waste additional time and money. With the recent changes to debt-to-income mortgage guidelines, buyers need to keep their payments as low as possible. They will almost certainly go for the house that is $25,000 less, even if they don’t like it as much. Payment and price have always been important, but are even more so in this market and economic climate.
Sometimes making a little less, but getting out quickly and moving on to the next property is best thing to do. The longer a home stays on the market, the less likely you are to get fair value for it. List aggressively, even if you make less you will still be ahead of the game. Price is still the most important factor for buyers.