Getting the price of your home right is important. It sends a message to buyers and agents, and you want to ensure the message you’re sending is the the right message.
In this step we’ll take a look at the major factors to consider when setting your home’s list price.
In real estate, the word “comps” refers to recently sold homes that are “comp”arable to your home.
It is preferable to evaluate homes that have sold within the last six months and are located in the same neighborhood or school district as your home.
Your agent will scrutinize the data from recent comparable sales to come up with a suggested market value for your home. Your agent will also evaluate these comps to look for any factors that could have affected these sales – like how long they were on the market or their condition – in order to determine how much weight a particular comp should be given.
PRICE PER SQUARE FOOT
In NWA, agents often refer to comps in terms of price per square foot. The price per square foot is the calculation derived by dividing the sales price of the house by the square footage of the home.
Real estate square footage is based on heated and cooled habitable spaces. Therefore, garages and detached outbuildings on a property are not included in a home’s square footage.
A home appraisal is conducted by a licensed, professional home appraiser and is an unbiased estimate of the fair market value of what your house is worth.
Your agent is not an appraiser. While your agent can provide you with a likely sales price based on collected data, only an appraiser can give an official determination of value.
When your home is under contract, the buyer’s lender will typically order an appraisal of the house to ensure the amount of money the borrower is requesting for the purchase is appropriate.
While not necessary, it can be beneficial to get your home appraised prior to listing. Getting an appraisal early in the process will:
RENOVATIONS & IMPROVEMENTS
What are the updates and renovations to your home worth? This is arguably one of the biggest surprises and points of contention for sellers when pricing their homes.
While there are some home improvements that deliver a better return on investment when selling your home, you should not expect to recoup the cost of home renovation projects dollar for dollar. Because, while aesthetic changes may make a difference to buyers, they generally make little difference to appraisers.
Let’s say you’ve updated your home with granite counter tops and recently painted your walls to match current home fashion trends. You may think your home will be worth more than your neighbor’s home (which is similar in size and style) but has not been updated. Unfortunately, this is not always the case.
When an appraiser looks at a house they are checking to ensure your home has counter tops and painted walls, the type and color are personal preference and do not vastly affect the value of the home.
While it can be disappointing to discover that recent updates may not increase the value of your home, it’s important to remember that property improvements help attract buyers and help your home sell faster!
Put yourself in the shoes of the buyers.
Although it’s not an official measurement of property value, it’s a good idea to research and take into consideration other homes currently on the market when pricing your home.
These homes will be your “competition” so you want to make sure your home stands out as the best option when buyers look up properties similar to yours in type and price range.
Do you need to sell quickly? If so, this may be a factor to consider when you determine your list price. You may want to attract interest and increase your pool of buyers by offering your home with a list price at the lower end of the comps.
Are you willing to make necessary repairs and/or renovations before your home goes on the market, such as replacing stained carpeting or broken deck boards? If not, you may want to consider adjusting your list price accordingly or offering potential buyers an allowance to cover these items after the sale.
Is it the summer – a busy time of year for real estate – or the winter? Is it a seller’s market, where buyers are fighting over homes, or a buyers market?
Real estate is a business of supply and demand so it’s important to recognize that the time of year and current health of your local real estate market will influence the sales price of your home.