Setting an asking price for your home when you are ready to sell is challenging. So…why in the world would I be suggesting that you actually need TWO prices for your home?!? For starters, this strategy could make you a lot more money when you sell and could also cause your home to sell a lot faster.
THE STANDARD “ONE PRICE” APPROACH
As you may know, the way to calculate the probable selling price of your home is to find other properties comparable to your home that have sold recently and then make adjustments for condition, square footage, location, etc. Usually a real estate agent is the best person to do this, because they have access to the best data, and they should have their finger on the pulse of the market.
In any case, the standard real estate agent approach to pricing is to show the home owners the comparable properties’ data, and then price the home at wherever the client feels comfortable, without offering much strategic advice. Then, the agent takes pictures of the home, puts a sign in the yard, enters the information into the local MLS system, and presses the “ACTIVATE” button. And hopefully…showings start happening.
AN OPPORTUNITY FOR HOME SELLERS
Of course, there had to be a better way than the “standard approach”. So, we spend a lot of time thinking about the home-selling process and what we could do to give our sellers an advantage. One day, we happened to notice this thing called “flipping houses”. It’s kind of hard to miss, since there are about 20 shows on TV about flipping houses (e.g. ‘Property Brothers’, ‘Fixer Upper’, ‘Flip This House’, etc.). Anyway, the idea is that people notice opportunities to invest a reasonable amount of money in smart improvements, then sell the home for a big profit.
Well, we thought, why shouldn’t our clients have this same opportunity when they sell their homes? What if we could invent an efficient process where we could actually identify potential improvements for our clients’ homes, and even help them implement the improvements, so that they can make a nice, extra profit when they sell their property?
WHAT IS THE “TWO PRICE” APPROACH?
Well, being able to give sellers this type of information consistently, quickly, and especially, accurately was not an easy process to figure out. But over several years, we built a “Seller Success Team”, made up of two pricing analysts and four home preparation specialists. The analysts do the…analyses. They provide the home owner with a video report showing four key pieces of information: 1) a price, 2) a proposed improvement plan, 3) an improved price, (and if you’re counting, that’s TWO prices), and 4) the RETURN ON INVESTMENT (also known as PROFIT).
- So first, there’s the “AS IS PRICE”. This is the price the home would sell for if you did only the minimum preparation that almost always makes financial sense to do: a thorough cleaning, staging, and fixing anything that needs actual repair, such as broken windows and leaky roofs.
- Next, there’s the “PROPOSED IMPROVEMENT PLAN”. This is a list of improvements that will give you, as the seller, a good return on your investment. In this case, we aim for a “2 to 1” return. For example, if investing $1,000 in a certain improvement project would increase your home price by at least $2,000, your agent should recommend doing it.
- Then, there is the SECOND price, which is called the “IMPROVED PRICE”. This is the price your home should sell for after all the improvements are made.
- Finally, there is the RETURN ON INVESTMENT (also known as PROFIT), which is the increase in the price of your home, minus the costs of the improvements. That’s the extra money you get to put in your bank account or put toward your next home.
While I can’t speak for every brokerage out there, I can speak to how we carry this out at Relevate. At Relevate, your agent would present this report to you, and then, you can decide whether to go ahead with the plan or not. Some opt not to, and of course, that’s totally fine. But most sellers decide to do it, because it makes sense to them, and they like the idea of a $5,000, $10,000, or $20,000 return over a 60 day period. Just recently, we had one client borrow money from her parents to do the improvements, and they made an extra $34,000, because the home got tons of attention and multiple offers. That return helped them buy a much nicer home than they had originally expected to be able to afford.
If the home owner DOES want to move forward with the plan, we give them an additional report with all the details of paint, carpet, and flooring colors, including the exact fixture part numbers, granite style, vendors contact information, etc. We also offer to manage the improvement project at a reasonable cost, and most sellers do ask for that as well.
IS THE “TWO PRICE” APPROACH RIGHT FOR YOU?
If you are asking yourself if this approach could be right for you, your agent should say, “It’s totally up to you, it’s just part of my job to provide you with this information.” You should be able to wait until you see the report, to decide for yourself. Additionally, there should be no charge for this report. In fact, you might be thinking to yourself, “Hey, I know we’re going to sell SOME TIME in the next few years. Why don’t we make some improvements NOW that we know will more than pay for themselves when we DO sell, so we can enjoy them in the meantime?” Sounds like a good idea. Lots of homeowners do that, and your agent will be glad to help you make the best possible investment decisions.
I know that you may have other questions as well. For example, “When is the best time of year to sell my home?”, “Should I vacate my home before I sell, or is it better for a home to be occupied during showings?” or “How should I manage the timing of selling AND buying at the same time?” Those are all great questions that we aim to provide answers to. So if you felt this article was helpful, subscribe to our YouTube channel @RelevateAnswers to be notified whenever we publish more content like this. ALSO, please write your thoughts or questions in the comment section below.
Relevate Real Estate isn’t right for everyone, but if you’re thinking about selling or buying or know someone else who is, we are never too busy for you or your referrals to your family, friends, neighbors, and co-workers. If you already know a Relevate agent, just give them a call, and they’ll be happy to help. If you don’t already have a relationship with one of our agents, or if you live in an area where Relevate isn’t (yet), just send an email to me at email@example.com, and I’ll be glad to introduce you to one of our best agents or a great agent from our network in your area of the country.