Last night I has a listing appointment in Goodyear’s Rio Paseo subdivision, just west of Palm Valley and just north of the new Goodyear Centerpointe shopping center. Beautiful home sitting on an oversized lot with tremendous upgrades throughout the interior … but no backyard landscaping.
Adding landscaping probably isn’t a viable option for a couple of reasons. First, the owners will never see the money invested in the landscaping when they sell. Second, many buyers would prefer to choose their own landscaping given the chance – as long as the house itself is viewed as a “deal.”
Discussions led to the concept of offering a landscaping allowance versus compensating for the lack of landscaping through the initial pricing. I’ve never been a big fan of allowances in general as they highlight immediately any challenges associated with a home. But even more importantly, when you consider how homes are being viewed most often these days, the allowance may never be seen.
Let’s say a potential buyer is looking for homes online, knowing they don’t want to spend more than $250,000. Odds are their search will look something like this …
… with a hard cap at $250,000.
Now let’s say you’re pricing your home. Recent sales indicate a best price of $255,000 … except the other homes have backyard landscaping, which would cost you $15,000. So you have two choices – price the home at $240,000 (the $255,000 less $15,000) or price it at $255,000 and offer an allowance.
Same difference, right? Well, not really.
Assuming an agent is searching on behalf of that buyer looking for a home at $250,000 or less, the allowance might work. Agents tend to run their searches a bit above the buyers’ maximum price knowing full well the price often can be negotiated below that maximum.
But as I said, this isn’t how buyers search (as last night’s sellers admitted as we discussed how they’re searching for their homes in Minnesota.) A buyer who doesn’t want to spend more than $250,000 is going to search up to $250,000 about 99 times out of 100. And these buyers never will see the allowance being offered because they didn’t search quite high enough.
(Even if they do search high enough, most search sites don’t include the “public remarks” section of the MLS where the allowance would be listed, so they still won’t know it’s there.)
Most sellers opt for the higher price in fear that a buyer will try to negotiate the price lower. But the simple reality is buyers are doing that regardless of the original list price. And they’re less likely to look at a higher-priced home with cushion built in, knowing they have to negotiate further, than the “right-priced” home that they’ll still try to buy for less.
The key to selling your home is having it seen by ready, willing and able buyers. Pricing higher and offering an allowance rather than taking your medicine and lowering the price often will mean fewer of those buyers ever will know it’s for sale.
[tags]Phoenix real estate, real estate pricing[/tags]