Selling your home is broken down into 3 critical components.  Preparation, Pricing and Presentation.  Though pricing is the most critical factor in selling your home. 

No amount of preparation or marketing will sell an overpriced home.  Getting the right price will tie it all together for you.  Following are some factors to consider when pricing your home for sale.  We will set the stage for helping you to get the right price coming out of the gate.

How You Price Your Home Dictates Many Pieces of The Selling Process

• Showing Activity- A home that is even a little bit overpriced 3-5% will hinder showings on your home. 5-10% and showings can be almost non existent.
• If You Are Showing To The Right Buyers- An overpriced home will attract the wrong buyer. They will have expectations your home can not meet. Meanwhile, you have excluded the right buyer by your price. Most home buyers look at the top of what they can afford. By overpricing $20,000 you have excluded many of the right buyers.
• How Your House Competes- Yes, your house is competing for buyers with other houses. Your home must stand on its own merits compared to similar priced home. I doubt you would take a Hyundai Sonata to compete on the track against a Ferrari. Pay attention to your competition.
• How Long Your House Sits On The Market- An overpriced home will generally sit on the market unsold. The longer it sits the more stigmatized it becomes by buyers. As it sits it will usually need a price change to sell. It is important to price your home so it sells in sweet spot, the first 2-4 weeks.
• If You Are Turning Away Your Best Buyers- Your best buyers are usually the first through your door. They have rejected every other home in the marketplace. The best buyers have spent time in the marketplace and are ready to buy. These buyers have lost offers by under bidding, being overly strict on home inspections, etc... They are ready to buy
• The Ease Of The Sale- A buyer who feels he is paying a fair price is much easier to deal with throughout the home selling process. When a buyer knows they are paying an overinflated price, they become obstinate when problems arise. Every issue turns into a battle.

Get the price just right and the selling process will go much smoother for you.  Overprice and your frustration will quickly set in.

What To Know About A Homes Price

Pricing a Home Is Part Art and Part Science

Pricing a home is part art and part science. The difficulty is there are very few homes that are identical. Even identical homes in the same neighborhood can have slight differences that would impact values. One home could back up to an apartment building while one backs up to conservation land. Most buyers would be willing to pay more for the home backing up to conservation land. Thus, making it more valuable.

An experienced listing agent has a handle on the marketplace and what home buyers want and expect, as well as what they are willing to pay for.

Buying a car or an appliance is a matter of finding the model you like and shopping price. The future value of the item is identical no matter what you pay. Not so with most homes.

When pricing a home, it is difficult to come up with an exact number. You are usually talking about a narrow range at which a home will most likely sell based on comparable homes.

Your Home Is Competing

Some home sellers fail to realize that their home is competing with other homes in the marketplace.

It is important to note, that if a home buyer views your home and does not buy it, the buyer will move on to buy another home within a few weeks to a couple of months.  They failed to see the value of your home. 

Your home must stand out against other similar homes.  It needs to compete on price, condition, function and amenities.  Take the same house, at 550k it is rejected by the home buyers.  But at 520k it may have the appeal to a different subset of buyers.  It now looks good compared to the competition.

Your Home Will Sell for Fair Market Value

Your home is going to sell for fair market value.

Fair market value is the most probable selling price where both the buyer and seller agree to transact.  The home will have had reasonable exposure to the public.  Both parties are acting in their best self interest and both are fully informed and neither party is under duress to buy or sell.

It doesn’t matter what you or your neighbor thinks, or even your agent. 

You need a willing, ready and able buyer to step up to the plate to purchase your home.  Without that buyer you have not achieved fair market value.

Determining A Price Is Based On Sales History

Properly pricing your home is based on sales history.  It is not a number arbitrarily pulled out of the air.

Looking at similar homes that have recently sold will give you a very good idea what you house is worth.  Sold is the key word.  Sold home are the only homes that have established fair market value.  Anyone can list their home for any price and a listing price has not established fair market value.

Active listings, ones that have not sold, as well as homes that have gone under agreement can be an indicator of where the market is heading, but ideally you should only use sold comparables.

Pricing Your Home Requires Objectivity

It is important you review the sales data with your listing agent.  Don’t be afraid to ask questions and fully understand where you are at compared to your comparable homes.

Objectivity is critical on a home seller’s part.  Emotion can easily take over and an experienced listing agent can help you maintain your objectivity.  Price is about data and facts, not about emotion.

Finding The Perfect Price

Most likely your buyer is financing their new home and it will need to appraise for the purchase price.  If your home doesn’t appraise you may lose the deal.

Appraisers and real estate agents use a very similar approach to determine the price of a home. 

An appraiser is certified and is licensed to conduct an appraisal.  They have very strict guidelines they must follow.

Real estate agents use a very similar approach in the form of a Comparitive Market Analysis.  An agent does not have stringent guidelines to follow.

An appraisal will use 3 similar sold homes, make adjustments and average the prices.  An agent will use 3 or more similar sold homes and make adjustments.  They will give a determination of value based on the data.  A real estate agents comparative market analysis can be more subjective than an appraisers.

What Make A Comparable Property?

A home that has sold in the last 6 months or less.  Markets change on a dime, the closer in time the property has sold the better. 

A home that has sold in the same area.  Appraiser are restricted to one mile from the subject property.  It also goes without saying a comparable home must be in the same town.

A home with a similar location.  Factors about location include is the house in a neighborhood or cul-de-sac versus a home on a busy route.

Same square footage.  Appraisers are not allowed to go 20 to 25% above or below the square footage of a subject property.  It doesn’t matter what you neighbor sold for if it is twice as big.

A home with similar function.  Comparable homes must have a similar function.  It should have the same room bath and bedroom count. 

A home that is of similar age.  You can’t compare a 1950’s home to one built in 1995. 

A home of similar style.  You want to try to compare capes to capes and colonials to colonials.

A home of similar condition.  Condition covers how updated the home is visually, upgrades like new kitchens and baths and improvements like new roof or a new furnace.

Other factors to consider is view, amenities, lot size, etc…

Both an appraiser and real estate agent have some leeway to make adjustments to the comparable properties.  Such adjustments could be for condition, location or size if comparable homes are not readily available.  If an appraiser goes outside of Fannie Mae Appraisal guidelines, they must have an explanation.

When it is all done, an agent will provide you with a comparative market analysis.  It will show all the homes they used to determine price with the home stats as well as photos.  The report should also provide you with market data showing where the market is and where it is headed.

The comparative market analysis will show you a range of homes that sold.  There will be a high and a low as well as an average price along with the agents suggested list price.

Take An Active Role

Getting the perfect price for your home will be important.  In the end it is your decision on how to price your home.  10k or 15k could be the difference of your home languishing on the market or selling in a timely manner. 

All too often a seller will try to lead an agent to the price they want to hear and do not maintain an objective view.  A good listing agent just doesn’t tell you what you want to hear, they provide you with data to make a good decision.

An experienced real estate agent will help you set the correct price and not leave you wondering if you have the wrong price on your home.  They will provide a comprehensive comparative market analysis that will help you move forward with confidence.