With Inventory Woes, What’s The Secret Sauce to Pricing a Home in This Market?

Negative twenty-three percent. The total inventory of homes listed for sale in Tarrant County from January 1, 2021, to January 1, 2022, is down 23 percent.

That number, of course, is based on several factors: weather, time of year, the practicality of COVID (is it pronounced “oh-macron” or “ahh-micron” or does anyone care?), low inventory of new homes, a large migration of people to the state, etc. We’ve discussed all of these factors many times over the years. But, numbers don’t lie, and 23 percent is a pretty big number to be in the red.

Positive And Negative

As Realtors and buyers are frantically trying to find anything and everything to list, show, and buy, this can be both a positive and negative opportunity for buyers and sellers in the housing market. For sellers, inventory being down 23 percent means if they put their home on the market, it might not have much competition at all.

If a house is ugly, has foundation issues, is in an undesirable location, and is next to a sewage facility, but is the only home available in a particular area or at a particular price point, it might get more love and attention in ways of contract offers simply because there is no other competition. Just because a guy has a date to the dance doesn’t mean he’s a catch … it could just mean there are more girls than guys out there wanting to dance.

On the flip side, with inventory down 23 percent, sellers that are willing to put their homes on the market can list their home at a higher price hoping that someone desperate enough to find anything will agree or offer a higher price just to stop looking.

What Should I List My Home For?

I get asked this question all the time. The real answer is “I have no idea.” Of course, I wouldn’t be the award-winning, lovable, stylish Bow Tie Realtor if I didn’t have some idea. But it’s always fun to see the reaction on a seller’s face when I give that reply.

First of all, buyers and sellers need to realize that, “What is my home worth?” does not mean the same thing as, “What should I sell my home for?”

“Worth” means different things to different people in the housing market. Ultimately, the appraiser and bank will tell you what your home is “worth” based not on price per foot (a big no-no!) but recent historical data of similar homes in or around the area.

These days, many buyers are willing to pay above what the home appraises for in order to buy the home. Thankfully there is a promulgated amendment from the Texas Real Estate Commission that gives buyers options when it comes to making guarantees of paying over a certain amount.

What’s Important To You?

Pricing a home to sell is not an exact science. A good real estate sales professional should be asking their clients what is important to them as they contemplate pricing and selling their home. Are they looking to maximize profit? Are they hoping to sell and move quickly? Are they willing to have the home sit on the market for a while and possibly reduce the asking price? Are they willing to make repairs or cosmetic improvements to make the home “pop?”

Of course, with inventory down 23 percent looking at us square in the eyes, many sellers can not only maximize their profits but have it happen quickly without sprucing up the home to garner attention.

Still, pricing a home isn’t easy.

Pricing Questions

What if there is no data to justify a price?

Let’s say a two-bedroom home in a community of three- or four-bedroom homes needs a price. What if your client’s home was built in the 1980s and is surrounded by brand-new homes? What about a home with a pool, three-car garage, and detached workshop is your home and all that has sold around that home in the last 180 days are zero-lot-line bungalows? What do you do then?

There is one school of thought that says, “Price lower in hopes of enticing multiple offers and having buyers drive up the price.” The opposite viewpoint says, “Price it high and if you have to negotiate lower after a while that’s okay.” Both can be “right” and both can be “not right” — neither is wrong, they’re just different.

At The End of The Day

Ultimately the goal of the seller is to sell a home and the buyer is to buy a home. Yes, that seems pretty simplistic, but it’s like baseball — see the ball, hit the ball, throw the ball, catch the ball. Obviously, there’s more skill in both real estate and baseball but hopefully, you get the drift.

No one has seen a real estate market like this. Ever. Factor in the outside issues as well — pandemic, masks, supply chain, distrust of government, media, others — and we are living in crazy times. Your Realtor should guide you on the sales price or offer price to the best of their ability. Unfortunately, there are some less-than-stellar agents out there, but they’ll weed themselves out eventually. Still, when it comes to listing your home, be smart, know what’s important, and if you want to be greedy you can be. If you don’t want to be greedy you don’t have to be. Likewise, when buying or making an offer, have a great local lender sharing good information counsel you so that you are comfortable with the amount you’re offering.

At the end of the day, as a seller, do you feel good about the sale? As a buyer, do you feel good about the monthly payment and your new home purchase? Well then it’s a win-win and your Realtors did their job. Congratulations.