Pricing your home is the one of the biggest parts of your marketing plan. Too high of a price and your home won’t market, too low a price and you lose cash. In a hot market you might have much more room to experiment. If your market is slow as well as a slowing market, pricing becomes considerably more crucial, and you’ll want to get this right the first time.
When Real estate agents price your home, they use an approach called a CMA, or Comparative Industry Analysis. They compare your property to homes that have bought from your area within the last 30-90 days, also to homes like yours that are currently on the market. The system is simple but the real benefit comes from knowing which comparables to pick. Two CMA’s done on the same home can vary greatly if the same comparables are not used. This can be difficult to execute objectively. If you think it could be challenging for you to look at your home fairly, it might be best to get a third party opinion. (I always suggest a home evaluation.)
A good knowledge of the area is very helpful. Perhaps one of your comparables did not sell beneath normal conditions? If the property was sold due to a divorce or impending foreclosure, this can have a big impact on the price and thus your investigation.
When determining how to position your home on the market another important thing to look at is “days on the market”, or how long it takes the actual homes in your area to sell. This can tell you what the market is such as and how much “wiggle” room you have.
In order to create a valuable CMA you need excellent, accurate information. The hard part is locating information on sale prices and also days on market. Real Estate Agents have access to all this information. An appraisal is another option. An appraisal is more detailed, but the theory behind it is identical. An appraiser will likely employ similar comparables as a Realtor conducting a CMA. Lenders require a complete appraisal thou, before making a loan. However, a new CMA is the standard way of pricing a home. Rarely is a complete appraisal needed before placing a home on the market.
Double Checking the Work
After you come up with a value figure you’ll want to check your position in the market. Find out how many residences in your price range are on the market. In which figure indicates the number of homes in your price range that buyers have to choose from and which of these would be the direct competitors.
Of all the properties in this price range, how many are priced below yours? How many above? In a normal market, you’ve completed a good job if your house is just about in the middle. If you’re inside a slow market, and you must sell soon, you might want to place your home in the bottom 10-20 percent. In case you’re in a hot market attempt putting yourself in the top ten percent, but don’t stay there for too long. If the traffic along with interest in your house is not there, bring the price back down.
Here are some things you will want to consider in order to price your home to the competition:
- Size: This is a big one. Purchasers often use square footage throughout comparisons, and on occasion make use of a dollars per sq. foot. analysis when analyzing home prices.
- Age: If your home had been built in 1920 and one of your closest comparables was built in 1995, you simply must make an adjustment. While homes age they change categories. They can be new, outdated, previous, or even historical. Again when selecting comparables it is very important to compare apples for you to apples, so if possible keep the age of comparables within 5 years of yours.
- Lot size: Try to keep comparables inside .05 acres of your lot size. Also consider the position of the home on the lot.
- Number of Sleeping rooms: Ideally, if you have a three-bedroom property, all your comparables will be three-bedroom homes, but keep in mind the floor level of the particular bedrooms.
- Baths: The location of the bathroom can be very important. Using a bathroom off the master bedroom provides value. Also, keep in mind that there exists a big difference between a full restroom and a half bath.
- Location: A home on a busy street just isn’t as desirable as one on a quiet tree-lined street. Make allowances for homes on nook lots or homes next to commercial locations.
- Condition: As discussed earlier. Here are a few things to stay away from when determining the selling price of your home. Price your home depending on what you want or need to get from the market.You might know the exact sum of money you need to achieve from the purchase, after the closing process, as a way to put a down payment on your dream home. However, the buyers looking to acquire in your area are not concerned with your following home purchase.
Be careful not to skip opportunities by pricing your own home above market value. Adding the price tag on upgrades and improvements to your asking amount. As discussed earlier, not all improvements will recover their fees at closing. Even if your home is substantially nicer than many homes in your neighborhood, you’ll need to make sure it is affordable to the buyers who would like to buy in your neighborhood.