The age-old adage about real estate is that there are three major factors in determining its value: “location, location, location.” While that may or may not be true, and location aside, a smart seller has to price an apartment right to sell quickly and at a fair price.
Perhaps the starting point is to understand the basis upon which value, which can ultimately be translated to offering price, is based. Real estate appraisal is based on three approaches to determining value, though not all three will be appropriate to any given property:
Income appraisal is most commonly and uniformly used for income producing properties such as rental buildings or even a three-family home. Cost appraisal is most commonly used for specialty properties such as a freestanding movie theater. Comparable sales is the approach most commonly used for homes, including co-op and condominium apartments.
Comparing Your Unit to Others
The basis of the comparable sales approach is really quite simple. The seller, or the seller’s agent who is usually a qualified, experienced real estate broker, looks at sales of similar units and makes adjustments for such things as views, interior finishes, and time-since sale. This approach is most reflective of the market at any given time.
Dorothy Somekh, an associate broker with Halstead Property in New York City, suggests the following. “First of all, compare your listing to the most recent sales of the past three months.” The best comparable is another apartment in your ‘line.’ Another apartment in your line is for all intents and purposes a copy of yours with the same layout, same building amenities, etc. The differences in fixtures and other factors such as views resulting from differing floors can be easily accounted for. If there aren’t any recent sales in your ‘line,’ you can look at other apartments in your building or in similar buildings in your neighborhood and make the appropriate adjustments.
Somekh continues that you should “include comparisons of maintenance for co-ops, common charges and real estate taxes for condominiums, and the condition of the apartment. This is important as buyers don’t want to do work before moving in anymore.”
How Long Has It Been on Sale?
Another major consideration in pricing is how long comparable apartments were on the market. For example, if the typical time to sell is four weeks, and an apartment has been on the market for say eight weeks, it’s an indication that something may be amiss. One distinct possibility, all else being equal, is that the asking price is too high. As to listing high and negotiating the price down, well that may not be an effective approach in a market where very often these days there are multiple bids and final purchase price can often exceed the asking price.
Are there other considerations? Somekh says yes. “If there is something that makes your listing stand out, emphasize it!” Whatever makes your apartment unique may be the magic factor that gets you the price you want in a reasonable amount of time. Let the buying public know.
And lastly, should you even use a broker? By all means, yes. The broker brings much to the table for the commission you will ultimately pay them. Their knowledge of the market will get you the best price, and the many services they provide are well worth that commission.
A.J. Sidransky is a novelist and staff writer at The Cooperator.