Monday, February 17, 2014

Why Similar Homes For Sale Can Vary in Price by More Than $20,000

Similar homes for sale can vary in price by $10,000, $20,000 or even more. This can be confusing for both buyer and seller, so why is this possible?

Pricing variances are sometimes attributed to unmotivated vendors waiting for buyers willing to pay their inflated prices. But, as many home sellers discover, "what you ask and what you get" can be totally different. Even with the same asking price, similar homes can end up selling for remarkably different prices. Again the actual selling price can vary by $10,000 to $20,000 for what appears to be exactly the same thing.

Some vendors think that just because a home in the same block sold for X amount, he or she can sell their home for the same price. As many find out, real estate selling doesn't always work that way.

In real estate, a lot depends on the buyer and the seller, and how keen each of them is to finalize the transaction. In other words how motivated is the buyer to buying, and how motivated is the seller to selling? Does the seller have to sell? How desperate is the seller? How urgent is the sale?

So, it is not uncommon to have two almost identical homes for sale, side by side, sell for radically different prices. Vendor "A" may WANT to sell and vendor "B" may NEED to sell. The motivation for each is quite different, and so the pricing strategies for the two properties could vary.

Then there is supply and demand affecting the property market. The market can vary from month to month, depending on the number and quality of homes for sale, and on how many home buyers are in the market at any given time. One home seller may get $20,000 more than a similar property, simply by selling a month earlier or a month later.

Other factors can come into play too. Like, how good are the respective buyers and sellers at negotiating the deal? How capable are the real estate agents or brokers? And, sometimes a home buyer pays a higher, or lower price, depending on the financing or settlement terms. And, then there is the property itself...

Two homes for sale may look the same from the outside but be immeasurably different inside. One may still have 70's, 80's or 90's decor whilst the home next door may have undergone major updating and interior improvements.

There are also exterior factors that can affect the price of similar homes in the same neighborhood. For instance, homes on primary ingress and egress streets (the main streets that lead in and out of a tract), generally appreciate more slowly than those within the tract that are not on primary streets. This is often because primary ingress/egress streets generate more traffic and are therefore, generally less desirable to a home buyer. Such homes may suffer lower prices.

Within a tract, a home for sale in a cul-de-sac may generate a higher price for the same reason. Less traffic is a big attraction for many home buyers. Cul-de-sacs are often like a maze and so they discourage through traffic. This can be a big benefit for those home buyers seeking residential privacy. The more benefits the higher the price!

Even a home for sale on one side of a street can sell for more than a similar property on the other side. There are also factors to consider like sun, ease of access, privacy etc.

And, certain communities, because of their name, are more prestigious than others. As an example: parts of Beverly Hills (in California) are divided from other communities by a street. The homes on the Beverly Hills side of the avenue command a higher price than those in the non-Beverly Hills community across from it. The reason is simple; Beverly Hills, is known worldwide for its high-end shopping, exclusive housing, movie stars and impeccable name. Homes for sale are priced accordingly.

Property prices can also be influenced by commercial or industrial developments adjacent to the tract. How desirable or undesirable are they? An astute buyer will check a community's master plan before committing to a binding sale. This is a must, especially if a tract (or home) is surrounded by vacant land. The community master plan (town plan) is usually drawn up by planners within the city or county and approved by a local planning commission.

Before buying a home, always find out what is going to be built nearby and determine how it might impact the value of the tract. This background research will be time well spent, especially if you uncover something that could potentially affect the value of the property.

In summary: finding out why one home is worth more than another, is worth the effort. This is especially so when you consider that the purchase or sale of a home is usually the largest, single financial transaction most people make in a lifetime.