One of the most challenging but critically important tasks you have as a future home seller is determining the ask (listing) price for your home.
When pricing your home to sell, you must understand that even though you can set any price you want for your home, it’s the market that determines the value of your home. Your opinion of value is not relevant if you cannot back up your opinion with evidence of what is actually selling or has sold recently. It takes good sales data to effectively price your home in such a way that given adequate market exposure the home will sell within an average amount of time and at a similar price range as compared with other similar homes in the same geographical area.
What are the primary factors that determine market value, and ultimately the best ask price?
1) Sales Comparables: What’s selling in the market is a result of the real estate consumer’s opinion of value, which is determined by what home sales actually get to the closing table. Again, and I cannot stress this enough, the list prices of homes do not determine what homes are selling for. You must use sold home prices to get an accurate picture of market value for your home.
2) Availability of Financing: The types of loan programs, the minimum down payments, and the creditworthiness of buyers all figure into market conditions. Generous loan programs that allow borrowing up to 100% of the sales price can greatly affect the market prices and marketability of homes within local markets.
3) Condition of Home: Has the home been well maintained? Does it have “curb appeal”? Have the major systems (Roof, Exterior, Windows & Doors, Heating & Air, etc.) been replaced? These factors also affect whether or not the home will qualify for various types of financing.
4) Home Inventories: Is the supply of homes increasing or decreasing? Are people moving to your area? Are builders constructing new homes to meet the demands of the local community? These factors affect supply and demand and can cause natural fluctuations in home prices.
5) Buyer Sentiment: Real estate values are very much a result of the optimism or pessimism of buyers at any time. Buyer sentiment can be dependent on the state of the local economy, perceived quality of life in the area, and the financial strength of the individuals living in a given community.
Where can you get help to determine the right price for your home?
A competent REALTOR who knows the local real estate market can provide (at no cost to you) examples of recent sales comparables and can give you good advice on what it takes to sell a well-priced and properly staged home.
If you want a more scientific approach to pricing, hire a licensed real estate appraiser who can provide you with a detailed report on comparative value, the same type of report financial institutions use to justify a loan on the home.
Either way, if you do your homework thoroughly to get your home priced right the first time, the process and marketing time for selling your home will be much more predictable and enjoyable for you in the future.