Pricing Your Home
How to Price Your Home
Your home will get the most interest the first couple of weeks it is on the market. You want it to be priced correctly when there is the most activity, and most people seeing it. This is why it is crucial to have your home priced correctly when you first put it on the market.
Correct pricing will achieve the highest sale price in the shortest amount of time. Correct pricing has nothing to do with how much you owe on your home, or how much you need to net from its sale. These factors determine whether or not now is the right time for you to sell, not how much you should list your home at.
Correct pricing has everything to do with the current housing market in your area. You live in your neighborhood; you've lived there for years. You've even looked at your Zillow estimate.
Of all the players, the seller usually knows the least about current market conditions in their neighborhood. The educated buyer likely knows the most; they study it daily and have been inside many of the homes that are on the market currently as well as the homes that have sold recently.
When I look at market statistics from month to month I notice the average sale price is within 2% of the average listed price of homes sold, almost without exception. What this means is, if your home is not priced within about 3 or 4% of market value, you will likely not get any offers until there are price reductions. Serious home buyers will not generally make low ball offers; they will just not make offers on overpriced houses.
Here are a couple of typical conversations I have with home buyers in regards to making offers:
"This house has been on and off the market for 8 months. It has been listed with 2 different agents and had 4 price reductions. It looks like the price is getting more in line with the market. There is no hurry but we can give them a low offer and see how they respond."
"This house has been on the market for a little less than a week. It shows great, is priced well and has had quite a few showings. I can ask their agent if they already have other offers. If this is the house you want, you need to consider making a full price offer, sooner than later."
Which of these conversations would you like to take place in regards to your home?
A very fast easy way to get a rough idea of the value of your home is look at the assessed value for your property taxes. In years past, assessed property values would often be more than 20% less than true market value. With local governments struggling in a bad economy, this is no longer the norm. In Spokane County they reassess property values every year and the assessed value and the market value are usually quite close.
Some of the internet based real estate marketing websites will give you sold prices of recently sold homes. You can look at comparable homes sold in your neighborhood. These are the same comparables an appraiser would use.
Some of these websites will also give you an estimated value of your home. The accuracy of these values is questionable and this is of little value.
You may want a Realtor to perform a CMA, (comparative market analysis). This is something they will generally do for free in hopes of getting the listing.
A Comparative Market Analysis
A Comparative Market Analysis is a report prepared by a real estate professional to help determine an appropriate asking price for a home.
A comparable, or comp, is a similar property used to help determine the value of the subject property. Comparables should be in the same neighborhood. They need to be the same or very similar construction styles. Adjustments can be made for size, number of bedrooms, number of bathrooms, and garage size. The condition of the property also needs to be taken into account.
An appraisal is also an opinion of value, but it is prepared by a licensed appraiser for a lender when applying for a loan. An appraiser will only use recently sold properties for comparables. They will not use houses that are currently on the market. Appraisers have very tight guidelines on which comps they can use. This is important to know, because a deal may fall through if the house does not appraise for enough to get the loan.
In a comparative market analysis, a Realtor will use houses that are currently on the market as well as recently sold homes. Houses that are currently on the market are important in establishing an asking price because they are the competition. It can be assumed that prospective buyers that see your home will also see them.
If a seller has a couple of real estate agents prepare market analyses, the higher one is not necessarily the better one. It is possible for an agent to come in high on a price opinion in hopes of getting the listing, only to ask for a price reduction a short time later. This is not doing anyone any favors.
If you have concerns that your real estate agent is showing you a CMA with an inflated value to get the listing, or a low value for an easy sale, look at the comparables. See if the price is in line with the homes recently sold, and competitive with the homes on the market. Because it is your neighborhood, you will likely be more familiar with these homes than your agent.
written by:Todd Hays