Pricing Your Home To Sell
by Debra McCann
Many factors influence the value of a home, such as local economic conditions, the home's location, supply of similar homes in the same price range listed for sale, number of buyers currently in the marketplace, the physical condition of the home, the financing available, and the desirability of your home compared to other nearby homes now available for sale.
Factors that affect the value of your property in today’s market:
Location is the single most important factor in determining the value of your home.
Prospective buyers compare your property with competing properties. Buyers will perceive value based upon properties that have sold or are available in the area.
Property values are affected by the current real state market. As the real estate market cannot be manipulated, a flexible marketing plan should be developed which analyzes the current marketing conditions and individual features of the property.
The condition of the property affects the price and the length of time to sell your home. Optimizing the physical appearance of your home will maximize the buyer’s perception of value.
Pricing your home properly from the beginning is an important factor in determining the length of time to sell your home.
Comparative Market Analysis
A comparative market analysis is an effective tool that gives a good indication of what a buyer will pay for your home because this analysis is based on current market conditions and comparable sales in your neighborhood. Properties located in close proximity to your home that have similar characteristics, such as lot size, square footage, number of bedrooms, baths, etc., are researched.
To get a complete picture of your local marketplace, the CMA should include information about currently available comparable listings, pending sales, sales that occurred within the last 6 months, as well as information about listings that did not sell during the listing period. These are called expired listings.
- Currently listed homes will identify the competition
- Recently sold homes indicate what buyers are willing to pay
- Pending sales will give us an idea of the demand for this type of home
- Expired listings of homes that fail to sell suggest what buyers will not pay
Taking into account comparable sales, pending sales, listed prices, the market, average sales time, and available inventory, you can arrive at a competitive asking price for your home.
Risks of Overpricing
All sellers would like to realize the highest possible return from their property. Asking too high a price is costly because it causes a property to miss its market. When a price is too high, those buyers for whom the home would be right won't see the house because it is out of their price range.
Even if you eventually decide to lower your price, the initial excitement that is created when a new property hits the market will have been lost. When you price your home within the current market range, your home has the greatest number of opportunities to be shown to the greatest number of interested, qualified buyers.
In order for a buyer to qualify for financing, most banks will require an appraisal on the property before they agree to fund the mortgage. If the appraisal doesn't support your price, you could lose the contract even after accepting the offer, leaving you with your home back on the market.
An overpriced home sells the competition. If your home is the highest priced in the area, it may have to sit there unsold until all the similar, but more realistically priced homes have sold. Since new ones keep coming on the market, this could continue indefinitely until you reduce your price.
When a property is first exposed to the market, both buyers and agents will make an evaluation compared to what they have already seen. An appropriate listing price will immediately attract their attention and generate activity. Your listing price must be realistic enough to immediately attract this attention.