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Pricing your Home

MOST IMPORTANT FACTOR: THE PRICE TAG

The most important factor in marketing your home is the price.  Real estate is the one of the few markets that is truly a free market.  Your house is worth what a buyer is willing to pay and what a seller is willing to accept.  It’s really about supply and demand.  If you price your home too high, it will sit without selling.  If you think you will start by pricing it high and then dropping it, you risk losing potential buyers.   Here are some tips.

  1. The first step in pricing the home is to contact a real estate agent and have them do a competitive market analysis (CMA).  They know the market and they have no emotional attachment to the house.  Agents generally do not charge a fee for a CMA.  Their motivation in helping is that you might consider using their services in selling the home.  If you intend on marketing the home yourself, perhaps you will consider them in the future with either selling the home when you can’t sell it on your own or using them to help you find the new house.
  2. You may consider hiring an appraiser, but usually an appraisal is done after you have an accepted offer.  All lenders require that an appraisal be done.  Each lender has a list of their own approved appraisers.  The appraisal that is done before you  receive an acceptable offer may or may not be approved by the buyer’s lender.  Therefore, you may end up paying for two appraisals.  A real esate agent’s CMA should be sufficient to get started.
  3. Whether you decide to do the pricing yourself or invite a real estate agent to assist in accomplishing it, begin with finding comparable sales and current listings that are similar to your home.  Similarities should include square footage, floor plan, neighborhoods, age, amenities, and condition.  If you have a two story home with 2400 square feet built in 2006, use comparables that are two stories with square footage within 200′ (plus or minus) built within 3-5 years of your home.  Try to stay within the same neighborhood or if necessary, neighborhoods in close proximity to your neighborhood and in the same age range of development.  You should not go back more than six months to find similar sales.
  4. Similar condition and amenities are very important and need to be considered when comparing sold and current listings.  If you have recently remodeled your kitchen, then look for comparables that have done the same.  If you have replaced your roof, furnace, air conditioner, or appliances look for similar comparables.  New carpet, new paint, or new plumbing fixtures will also need to be considered.  Amenities such as swimming pool, RV parking, or being on a golf course or park will also need to be taken into consideration.  Adjustments will need to be made to compensate for differences. The value of these items are determined by the area of the country inwhich you live.  For example, a swimming pool in the northwestern part of the country will not have as much value as in California because of weather and suitable conditions for usage.  Again, real estate agents know the value of these amenities and can give accurate accounting of how these will affect the eventual price of your home.
  5. Consider how long the comparable properties have been on the market.  Ask yourself why they have been for sale for so long without selling or why did it take so long to sell.  What common factors are involved?  Is it condition?  Is it location?  Is it price?
  6. Finally, when listing the home put some wiggle room in your price.  Everyone wants to negotiate so you need to be prepared that offers on your home will be below what you are asking.  The higher the price range of your home the more wiggle room you will need.  If your home is priced at $500,000, you can expect that you will get offers of at least $50,000  less.  If your home is priced at $150,000 then you can expect offers of at least $10,000 below your asking price.

Pricing your home is more of an art than a science.  There are many factors involved in the decision.  In a seller’s market you can be more aggressive in what you are asking.  In a buyer’s market you will need to be very conservative.  Whatever you do,  make sure that you are meeting the market and that you are realistic with your price or you will be frustrated.