Why Is Pricing DC Real Estate So Difficult?
There’s a saying in real estate: “A home is worth what someone is willing to pay for it at any given point in time.” But there are neighborhood and area standards, bottom lines and high bars created by comps and other measures, and “spidey sense” possessed by those who know the market well. A great agent can be your most effective tool in pricing your home for greatest profit. We believe in transparency and education as part of a real estate transactions, so we share some tips on pricing and valuing real estate in one of the nation’s most competitive and confusing markets.
Start with a calculated range
“How do we go about pricing DC real estate?” It’s a common question from owners wanting to list their home and buyers interested in making an offer. In the era of big data it feels like there should be a precise answer, but pricing a home involves some subjective aspects that lead to uncertainty. The process is more like predicting the weather than shopping in a retail store. Every price is a forecast about the current market, the demand in the micor-neighborhood, and the buyer pool at that exact moment in time. When a weatherman tells us there’s a 70% chance of rain, we know it’s a good idea to take our umbrellas even though there’s still a 30% chance the day might be dry. When you decide on a home price, it’s a similarly weighted calculation.
We recently sold a single family home in the Crestwood neighborhood at a record price for the home’s type and size. Many factors played into getting that big win for the seller, but one key element was the range of listing prices we provided to the seller. We discussed the likelihood of ending up at a specific point with each option and what they would likely need to do to market the home at that price. As we went forward, the range narrowed based on what was available, sales prices of nearby homes, and the improvements they were making. Even the listing price we chose when going on the market wasn’t an exact representation of the value, instead a strategic choice based on how buyers were behaving in that neighborhood market at the time. For a moment in time, the value is clear on paper, but as market data, neighborhood sales and buyer behavior shift, so does value.
Factor in emotion
Emotional attachment factors into pricing DC real estate, on the part of the buyer and seller. A buyer who falls in love with the feel of a home, or who has a history of losing properties to higher bids in a specific, desired neighborhood is likely to pay much more for a home than other buyers in the pool. Sellers appealing to this buyer are often the beneficiaries of unusually high sales prices if their presentation is matched to buyers’ expectations. Sellers who have a high level of emotional attachment to their home can sometimes be blind to the need for updating and staging. This is where the objectivity of an expert real estate agent is especially valuable.
Uncertainty can be a tool
Uncertainty is a key factor for buyers in competitive situations. Each buyer’s offer is a reflection of their personal search history and attachment to the home, but the winning bid can differ drastically depending the size and aggressiveness of the buyer pool at that specific moment in time. This urgency, or lack of it, is an element we factor in when pricing DC real estate.
Timing is important
Common time-related questions are; “Is my home really worth more in the spring than the summer?” and “Will I get a better deal in August or mid-winter?” The answers are, again, subjective. A home certainly might sell for more in spring versus summer, but it could suffer by comparison to the glut of similar listings in the spring market. Listed in August, however, it might garner competition amongst the more desperate souls braving the ghost town market of August. Good timing depends on your needs and your agent’s savvy in handicapping the market at any given time. At any time of the year, a well presented home priced for the current market is apt to sell more quickly and at a better price than homes that are packaged in a less attractive manner.
Terms are key
Each term of an offer has a value to individual sellers. ‘Offer A’ may include a higher purchase price, but ‘Offer B’ may have few or no contingencies – and the negotiation that often accompanies them, for instance. There’s a threshold at which most sellers will take security over price. Every seller values each term differently and there are definite limits to how much of that information is available to buyers when offers are drafted. Be sure of your limits and objectives before listing your DC home for sale and cater to buyers who can provide those terms.
Is There a Concrete Value For a DC Home?
No. You can compute, compare, poll and hypothesize, but in the end there is only a value range based on old data, market trends and many other outside factors. Knowing the market well and evaluating with an unemotional, unbiased viewpoint is the best indicator of price.