Let’s face it. The real estate market is facing a growing inventory crisis with a dampening effect on home sales. For fix and flip investors, pricing a property correctly is essential to selling it as fast as possible, no matter the market conditions. As a real estate investor, you also need to choose the right price to assure good profits and cover all of the renovation expenses.
If you overprice the property, the home will be less appealing to potential buyers and spend costly months on the market. Not an ideal outcome! Here is how to set the right price for your fix and flip property the first time around:
Avoid Property Pricing Mistakes
It’s natural for a property on the market to have interest wane after about three weeks of viewings. This is what makes setting the right price for the property so crucial. While you can always lower the price later, it might be too late and you’ll lose out on the first round of enthusiastic buyers and offers. It’s better to price a property too low than too high to start. Pricing a property too low is less detrimental as homes below market value will receive more competitive offers, pushing up the price.
When narrowing down pricing, ask yourself, what price do you think will represent the property’s real value to buyers, but still covers your expenses? Even if the local buyer pool is booming, overvaluing a property is a near guarantee that it will sit on the market and rack up costs.
Setting The Right Price
To establish your fix and flip price accurately, look at similar properties listed in the same neighborhood over the last three months. Professional property appraisers don’t use comparisons older than that as it won’t accurately reflect the current housing market. The state of the local real estate market will have a big impact on asking prices. It’s important to note that identical homes in the same street can have vastly different values due to buyer perceptions, no matter what the seller feels it is worth.
You should compare your property closely to local homes with similar square footage if possible for a more accurate pricing range. Several factors affect the value of a home, some with a bigger impact than others. You will need to adjust pricing further based on the property size, room configuration, proximity to local amenities and any sought-after upgrades. A professional property appraiser could assist you in establishing the value of a home more accurately.
Increase Home Desirability
Desirability plays a deciding role in getting your asking price. Properties that have features buyers want can charge a premium price. In fact, a fixed-up property in a hot seller’s market can be sold for more than 100% of their listing prices. Therefore, it’s key to get in touch with what buyers want prior to renovating the property.
What buyers want from homes is also constantly changing, but certain features are always popular. Natural lighting, pleasing room design and effective landscaping will go a long way in attracting buyers. Other aspects that affect home desirability include how close it is to local amenities like schools and transportation options. The demographic of buyers in your target area will dictate which local amenities will bring the most value.
Analyze The Buyer Market
The first step to selling anything is knowing your buyer. It’s important for you to analyze any available data based on local market conditions, learn who the buyers are and how it will affect your pricing. Property buyers’ needs will depend highly on their stage of life and will dictate what they want from a home. By using comparisons to recently sold homes, you can get an idea of how much buyers are really willing to pay for your property.
The ideal sales price for your property should have some room for negotiation with buyers and entice them into closing the deal. In a balanced market, it’s better to set your asking price similar to the last comparable sale in the area, adjusted slightly for the current market trend.
Setting the right price for your fix and flip property from the get-go is key to getting good returns.
Real estate investors can use comparable local property sales to guide their own pricing.
The desirability of a property and its location is a deciding factor in how valuable it will seem to potential buyers. Your asking price should always leave some room for negotiation, but be sure to set a limit as to how low you are willing to go.