Pricing the luxury home

When the sale of a house could garner millions of euros, selecting the asking price is a particularly weighty proposition.

Decisions, decisions, decisions. Selling a home is about making the correct choices. While location, condition, marketing and accessibility all contribute to how your house will sell, what you decide about an agent and list price translates directly into a favorable or unfavorable result. After the selection of an agent, nothing is more central to a successful sale than finding the best asking price, and nothing can be as vexing for sellers and their agents than arriving at this figure.

In the luxury realm, a home's asking price is even more significant, since the purchase of a luxury residence is as much a decision of the head as it is of the heart. Compared to other price ranges, buyers in the upper brackets are more likely to think of a home or estate purchase as an investment decision. The more sophisticated the buyer, the less emotional is the purchase.

The ratio of price to the number of buyers gets larger, pricing becomes even more critical. As the prices go up, there are so few buyers. As an example, on the local market, where there might be over 300 homes in excess of 2 million Euro and only few real buyers every months.

Too high a price can translate into a limited number of showings and no viable offers. Too low a price means that sellers walk away from the closing feeling less than satisfied because they know money has been left on the table. Midway between these outcomes hovers what would be considered the ideal listing figure, one that achieves a sale at the highest price in the shortest amount of time by reaching the largest pool of potential buyers. Arriving at this figure is not always straightforward. It involves sage decisions on the part of the seller, and straight talk from his or her agent as they both evaluate seller priorities, recent area sales and the strength of the local market.

A broker who walks into someone's home and leaves giving them a price (on the spot) hasn't done their homework. Marbella is a large market, and there is always something going on. You have to be up on everything, because if you are not, you are not doing the right thing for the seller.

Perfect pricing

Expert agents like Muller Consult know that their job also involves deciphering seller motivations. The success of the seller/agent relationship is tied to how realistic the price is, and how well the agent understands the objectives of the seller.

Rather than price, one of Muller Consult's first questions for prospective sellers is: "How quickly do you want to sell?" Time is an important consideration for homeowners, especially if they plan to redirect funds resulting from a sale into other investment vehicles. Often, time translates into money spent on interest payments, taxes, heating and maintenance, which means that an unrealistic price can be costly.

Experienced agents know they have to find out what the real goals of the sale are and then determine how long the sellers are willing to wait to achieve that goal. An often-heard comment is: "I really don't have to sell." If that is the case, we ask, "Given the invasion of privacy and everything that accompanies selling, why are you selling?"

In addition to time, the temperament of the local market is also an important component of the pricing equation, and locale usually has broader connotations than simply geography. Locale can mean a specific community or subdivision, as well as a specific price bracket. A good example is the real estate market in Marbella.

An agent's role

How does an agent determine this ambiguous, but ideal amount? Experience, familiarity with the market and education all come into play as agents assess past sales. Knowledge of the current and past inventory of homes for sale is critical for accurate pricing. More complicated than simply substituting one home for another, this type of market analysis should take several hours or more reviewing past sales and compensating for differences in location, condition, square meters and amenities, as well as for appreciation or depreciation depending in the pace of current sales in the subject's potential price range. First-hand knowledge of past sales is especially important in pricing unique and one-of-a-kind properties, for which there often are few, if any, comparable sales. However, seasoned agents who consistently work with luxury homes will have experience with similar properties, which they can use to make this type of assessment.

Accounting for the state of the current market also requires wisdom born by experience. In the case of a hot market like Marbella, the broker uses comparable sales as a guide and then prices the property "just a hair above.

Pricing just under the comparables often gets multiple bids, more interest and eventually a higher sales price. When choosing an agent, we suggests asking about pricing: "Are they going to price right against the comparables or are they going to price under the comps where people perceive value?" However, Marbella's market is still strong, and a different market might require other strategies.

Many brokers advise sellers to hire an appraiser to evaluate the property. This can be useful in not only determining a sales price, but in backing up the price if a less than optimal offer is received.

When it comes to pricing, the temptation for sellers is twofold. One is to test the waters by opting for a higher price that the agent recommends. While some agents believe this is acceptable in a sellers' market, most experts advise against it. The closer the price is to the point where buyers see value, the more buyers you will have competing for the purchase. Buyers, particularly those in the upper price ranges, are savvy; they know when something is overpriced. That is why sellers should step back and look at their homes from the buyer's perspective, even if it means taking a day to preview the competition. Also, brokers working as buyer representatives will be obligated to point out homes that are overpriced, and once buyers hear that a property is overpriced, some won't even look at it.

All of which means that sellers should be prepared for honest talk from their agents regarding prices. Good agents tell clients what they need to hear, not what they want to hear.

The second temptation is to pick up a listing agent because she suggests the highest price. This is the most common error sellers make. Do not choose a listing agent based on the price they give you. At the same time, stories of agents suggesting high prices simply to garner a listing are all too common. These same agents often come back within a few weeks suggesting a price reduction.

Muller Consult recommends that sellers not entertain prices until they decide who they can work with. Don't allow price to be what drives you to select your agent. Once an agent is selected, we urges sellers to appreciate (an agent's) expertise, experience and education. Remember, this person didn't become a top producer or become respected by mishandling her listings.