10 Feb How To Accurately Price Your House
As one would expect, there’s a lot involved and a number of questions that need to be asked when it comes to selling your home. How do you go about finding a trustworthy agent who will do a quality job representing you and your home? How do you stage your home? How long will it take for your home to sell? And, indeed, the questions go on from there.
But, perhaps the foremost question that comes to many sellers’ minds, particularly those who are selling a home for the first time, is how to come up with an accurate listing price, one that maximizes the monetary investment put into the house, but does not put the house out of the financial reach of its target base of buyers.
Now naturally, we all want to receive the most amount money out of what was perhaps one of the largest investments we made. But, that does not mean that one should put one’s house on the market at some exorbitant or unfounded price. After all, a critically important rule to remember is that a home’s “freshness” appeal begins to wane dramatically after 21 days on the market. Put another way, once you list your home, it will receive the most amount of attention from prospective buyers during those first 21 days on the market. Therefore, putting your property on the market at an unreasonably and unjustified high price may very well drive away many potential buyers. Which means, in turn, that the benefits of that critical 21-day honeymoon stage will have gone to waste.
This is all to say that it’s incredibly important that you do your research on what a fair and accurate listing price is for your home prior to putting it on the market.
But, of course, that leads to another question – namely, how does one come up with a fair and accurate value for one’s home, and what kinds of factors play into this valuation process? A real estate appraiser, usually sent by the bank, is most often called upon to judge a home’s real value. Beyond that, those who are selling their homes may also be inclined to get a second judgment from their real estate agent. In respect to listing price, the agent may be able to provide a more refined and up-to-date home valuation based on the current trends of the local market and what other similar houses in the area have sold at recently.
Now, regardless of whether your home valuation process involves an agent or appraiser, or both, it’s been my experience as a real estate broker that many sellers feel far more secure in the selling process as a whole when they better understand what factors went into their home’s listing price. For this reason, I thought it would be worthwhile to give a brief summary of some of the major factors that play into the process of accurately assigning an initial listing price for a for-sale home.
Let’s discuss a few of these factors.
Oranges to Oranges and Apples to Apples.
Determining a listing price for a home is clearly a numbers game. But, it’s also a who’s who game. That’s to say that one of the most commonly used methods for determining a listing price for a home, besides appraising it based on its offered features and condition, is comparing what other similar homes recently sold for in the area.
This is a common practice and completing this kind of neighborhood comparison is imperative before putting any house on the market. However, in doing this comparison research, there are certain essential guidelines that should be followed:
- Make sure to compare apples to apples. That means that it’s important to compare your house with similar homes that sold in your neighborhood in the past six months; similar as far as age, square footage and offered features (number of bedrooms, bathrooms, etc.)
- Also, you should try to gain a firm understanding of where the price differences lie in your surrounding neighborhood. It’s common for neighborhoods to vary in real estate prices. And usually a physical barrier, such as a major road or freeway or railroad, marks these price differences. So make sure you understand where these neighborhood price divisions are located and relegate your comparison research to only those areas that are similar to your home’s area in price.
- Take a tour of active listings in your neighborhood that are similar to your home and see first-hand what kind of competition you’re up against.
The Current State of the Real Estate Market.
As we all know, the real estate market, just like any other market, has its fluctuations and trends. And fortunately or unfortunately as the case may be, these trends oftentimes play a major part in determining a listing price for a home. You may have already come across the terms seller’s market and buyer’s market as they apply to the real estate world. Both these terms highlight very real scenarios that can have a real affect on setting a home’s listing price.
A seller’s market favors, namely, the seller and is marked by a shortage in supply of for-sale homes as compared to demand. On the flip side, a buyer’s market favors namely the buyer, primarily because the supply of available, for-sale homes on the market exceeds the amount of demand.
Though this is by no means a hard and fast rule, and it’s really mentioned as a way to provide more perspective, in a seller’s market, the seller will have a higher possibility for selling their home at a higher price and, thus, may want to put their home on a market at a higher initial offering. As a quick caveat, a seller should always refer to a real estate agent or broker before putting their home on the market at an ambitiously high listing price.
By contrast, in a buyer’s market, a seller will face increased competition from other similar homes on the market and, because of that, it’s likely that a seller will face strong pressure to list their home at a lower or more competitive price.
Now whichever market you, the seller, end up listing your house in, the key takeaway should be that information and knowledge is of the utmost importance. The more knowledge you have about the current real estate market and what other similar homes are selling for, the more likely you will be able to find a listing price for your home that yields both a buyer and a return on your property investment.