PRICING YOUR HOME TO SELL
October 20, 2009 | Maureen Realty
Attracting buyers is the name of the game. As a seller, you have two goals:
1. To get the most money possible
2. To sell as quickly as you can.
Price is the number one factor that most home buyers use in determining which homes to view. Although the price is set by you, the seller, the value of the home is determined by the buyer. Don't allow your enthusiasm to warp your judgment and lead to overpricing.
The second most important factor is the condition of the property. Browse around on our website for information on how to prepare your propety to sell.
How Do I Price My Property to Sell?
There are two methods to determine property value, an appraisal and comparative market analysis.
Appraisals vary in cost and are defendable in court. They average about $400 for a single family home and more on multi-family dwellings. Appraisers review numerous factors and base information on recent sales of similar properties, their location, square footage, construction quality, excess land, views, water frontage and amenities such as garages, number of baths, etc.
A Comparative Market Analysis is an informal estimate of market value performed by a real estate professional. The CMA is based on sales and listings that will compete with your property that are similar in size, style and location. A range of values will surface, thereby allowing the determination of a reasonable market value that will most likely be supported by an appraisal that may be required in the lending process of a transaction. Many REALTORs offer a free analysis anticipating they will have a new client.
What Affects Your Asking Price?
- Urgency. How quickly must you sell?
- Competition. How many homes are available in your price category and area?
- Available Financing. What are the current home loan interest rates? What financing alternatives are available for your home and area?
- Competitive Market Analysis/Appriasial. Do you know what similar homes in the area sold for within the last six months? Appraisals can many times go back for one full year.
- Expenses. What are your selling costs such as repairs, closing costs, surveys, commission, etc.?
What Doesn't Affect Your Asking Price?
- Original Cost. Your price is determined by today's market.
- Investment in Improvements. Potential buyers will evaluate you home (i.e. wallpaper and carpet) and may include the costs to remove or replace in their offer.
- The Cost to Build Your Home Today. A replacement value is determined for insurance purposes only.
- Personal Attachment. Prudent buyers purchase based on their emotions, not yours.
- Neighbor's Claims. Don't listen to what your neighbors tell you is the fair market value for you home. Other homes in your neighborhood may not be as similar as you think. Also the terms accepted by both the buyer and seller greatly affect the sale price.
What Happens to an Overpriced House?
- You'll Help Sell the Competition. The "correctly priced" homes look even better if your is overpriced. Most buyers are competitive shoppers.
- Your Home Will Stay on the Market a Long Time. Did you know that 80% of your potential buyers will see your house in the first four to six weeks? If you don't sell them then, it takes approximately three months to replace them with an equal number of newcomers.
- You'll Lose Market Interest and Qualified Buyers. Serious buyers use the value, quality and price of similar properties as deciding factors.
- A Negative Impression is Created. People will wonder why your house is still on the market - they'll believe something is wrong with your home.
- You (The Seller) Would Lose Money. You may have to make extra mortgage payments as well as incur taxes, insurance and unplanned maintenance costs.
- You (The Seller) May Have to Accept Less Money. Studies show that the longer a house is on the market, the greater the discount off the list price. Often a seller will accept less than fair market value in order to sell because of an approaching deadline.
- There is the Potential for Appraisal Problems. The appraiser from your buyer's lending institution must agree that the home is worth the asking price. If the appraiser believes the price is inflated, the loan may not be approved.