A Tricky Business
Knowing how to price your home for sale accurately can be a tricky business, but it’s also important.
A too-high price can mean more time on the market, and even no offers. Setting the price too low may also discourage buyers, as they wonder why you’re settling for less money. You may wind up not making the true value of the house, and that would be a shame.
It’s tricky because there are many factors involved, not all of which you and your real estate agent can control. Some of these factors are: the time of year (the prevailing weather when you’re selling, or major holidays), a lot of unsold inventory in the local market, the location of the home, and whether interest rates are low or high.
There are a number of ways to assess Fair Market Value, the price at which sellers and buyers are willing do business. Some are more accurate than others, but they can all contribute to your knowledge.
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Methods for Pricing a Home
There are two main methods professionals use to find out property values. One is the cost method, which adds up the home’s assets, including land and renovations, minus depreciation, to arrive at a number.
The second method, more common and used by online value estimators, is the sales comparison method, which looks at the prices of comparable homes in your area.
A combination of both, plus the experience of a professional, is your best bet for the right price.
Who Can Find Fair Market Value
- Your first and best resource is always your real estate agent. If you’ve chosen well, she will have extensive knowledge of and experience in your local market. She will also have the practiced eye to see your unique property and what its assets are.
Your agent will create and provide you with a CMA for your immediate or extended area, so you two can see how the local market stands. This is part of his job!
- You can bring in a professional appraiser, an objective third party expert at assessing a house and local property values. Appraisals can be helpful if you and your agent cannot agree for some reason, or if you just want one more informed opinion.
- You can DIY online at sites such as RealtyTrac if you have square footage, lot size, # of bedrooms/baths, garage square footage, and the years your house was built and sold at your fingertips.
You can also use free home value estimators online that use sales comparison date to give you their estimate. If you use a couple to compare, you will likely find discrepancies; experiments have shown six- and seven-figure differences in value.
These sites don’t consider the house’s condition, renovations you’ve done, or assets like great views or schools. They’re a good place to start for a “ballpark” figure, but not for your final valuation for successful pricing.
Getting to a Price
You and your agent need to discuss and agree on repairs or updates you will be making to the house to help the sale, such as reseeding the lawn, painting, or changing out fixtures/hardware. For your sale to go its best, you will also need to declutter, clean, and stage the house. Make your sale stand out from the crowd in whatever ways you can.
Once those updates are in the mix, and you have the comparable sales in your area, you can commit to a price together. You will have to consider, too, all those uncontrollable variables mentioned above, and your own desires. How long, for example, are you able or willing to have the house sit on the market?
If there is a gap between local high and low prices for comparable homes, you can settle somewhere in between, to balance being competitive with getting the best price.
Once it’s listed, keep an open mind, keep the house looking great, and stay confident.