How do I set the price of my spec home?
Setting the price at which to market your spec home is probably the single most important thing you will do. As discussed in previous posts and what we keep going back to, if you are a spec home builder/investor, not a tract or volume seller, you should have a goal to sell your homes at a 33% markup. Is that outrageous? No. Is it realistic? Probably not. Is it still a reasonable goal? Yes.
Before listing your home on the market you should look at every similar home in your area that is on the market or that has been sold in the past 2 years. Compare square footage, location, view, upgrades and finishes, exterior (stucco, siding, stone, etc) against your home. You will soon become familiar with what your spec home’s reasonable range will be.
Finding the Reasonable Range and then Listing Below Competition
I learned a valuable lesson when I bought my last used car. We looked at Cars.com for the vehicle that our family wanted, a Toyota Sienna (I know I drive a mini van). I knew every Toyota Sienna that was on sale and the price it was going for within a 100 mile radius.
We started at the location closest to us and made an offer on their Sienna. They moved from their asking price by almost two thousand, but I was unwilling to buy it just yet. Next, we went to a small used car dealership off the beaten path. Their Toyota Sienna’s were listed the lowest, and it wasn’t close.
I made them an offer that was $3000 below their asking price. He said that they were unwilling to negotiate their price as it was the most reasonable price around. I agreed. However, I couldn’t believe that they wouldn’t budge. I made a different offer. He again declined.
While I was “negotiating” on price, another family came up and made a full price offer on the vehicle. We lost the car we wanted. My wife just about divorced me.
I was amazed at how many people were in their lot looking at their cars. It was because they listed their vehicles at a ‘rock bottom’ reasonable value and held to that value.
List your Spec Home at a Rock Bottom Reasonable Value and Hold to it
You want to list your spec home at the lowest reasonable price that you can. This will bring in the people and the offers. After listed, hold firm to the price. There is no need to build in room for negotiations. If you have a quality, value home listed at a rock bottom reasonable value that allows for a good markup, you will likely sell the home.
Should I talk to a agent about Pricing my Spec home?
I hate to be a agent basher. I do think they provide a very good service. It is just difficult to justify their 5-7% and their control over the MLS.
Speaking to a agent is worthwhile, but do your own research. Real Estate Agents, as the rest of us, are interested in building their business and making money. They want the listing and may quote your home at a price that is more than it will reasonably sell for. You are not stupid. Look around. You can come up with a reasonable expectation and stick with it.
by: Levi Barber