Establishing a Home Price
Anyone selling their home would like the same thing - to get the best price and terms possible. However, determining the value of the home and getting the best possible price requires some market analysis and understanding of the process. There are several factors that must be weighed and balanced when establishing an asking price. Ultimately, assuming that your home is properly marketed, the market will determine what you can get for your home.
What is your home worth?
Owners will usually start out with an asking price that they would like to get. Buyers, of course, make offers based on what they are willing to pay. Depending on the circumstances, the actual selling price will usually be somewhere in the middle. There are exceptions to this, particularly in a hot market where there may be multiple offers and a “bidding war”.
There are a number of ways to help determine how much your home may be worth:
Comparable market analysis (CMA). A CMA will involve a review of properties that are comparable to yours to determine a realistic price range. The most accurate CMA’s will be both current and use properties that are as close as possible to yours. For example, reports can be run that will identify homes that sold in the last 6 months that were the same square footage, bedrooms and bathrooms, age, quality of development as yours. Special factors such as a great views or upgrades will also be factored into the calculations.
A CMA will also look at homes that were on the market and didn’t sell along with those that are currently for sale. Those that are currently for sale will be the competition that Buyers will be checking if they are considering your home. Since Buyers will choose the best home for the money, it’s important to be realistic with the asking price if you want to sell your home in a reasonable amount of time – or ever. Some Agents will propose an unrealistically high asking price to win your business. This practice is really not in your best interest because it doesn’t help you to accomplish your goals.
Check the competition by attending open houses. Another way to develop an awareness of the market is to go to open houses. Be honest with yourself and think like a Buyer. When you look at the competition, evaluate the size and condition of the property, the amenities in the development, the location. Buyers will be weighing all of these factors when they determine what they will buy and how much they will pay.
Factor in market considerations. Are homes like yours selling fast or slow? Are asking prices holding up or is discounting prevalent? What is the competition? Are people choosing new construction over resales? What are interest rates? What is the ratio of homes for sale vs Buyers in the market? All of these will have a bearing on what you can expect to receive for your home. Your Agent will be able to provide you with facts, figures and insights into the market and how it will affect your property.
Get a professional appraisal. While a Realtor will provide a CMA for free, getting an appraisal will require paying a few hundred dollars. A professional appraiser will come to your home and do an in depth analysis. Upon completion, you will receive a written report with the findings. In most cases, this will be an unnecessary expense since CMA’s done properly will serve the same purpose.
Check the Internet for comparisons. You can do your own CMA with some online suppliers. Some are free and some involve a fee. The drawback to these companies is they can’t offer the insight into the local market that is available from your Agent.
Understand and compare cost per square foot. One of the ways that real estate is evaluated is to compare cost per square foot. This can be useful for a quick basis of comparison when looking at a variety of properties. Since Buyers will be looking at this, look at your home and take into account quality and amenities, and compare your cost per square foot to the competition.
Setting aside emotion and personal bais will be in your best interest. While it’s normal to have personal attachments to our homes and all of the improvements and investments, it’s what the Buyer thinks it’s worth that counts. If your primary objective is to sell your home within a certain time frame and at the best possible price, your best strategy is to be realistic when evaluating the market and the competition. Your Agent will be able to provide you with the necessary information and advice to maximize your sale price and reach your goals.