PRICING YOUR HOUSE
Under-and-overpricing can cost you thousands of dollars and can delay a sale for
months. Learn how to use current market prices to arrive at the highest price buyers are willing
to pay!
Realistic pricing is your first hurdle. Buyers must believe your price is accurate or you’ll lose
them. By using up-to-date Competitive Market Analysis you can prove your house is realistically
priced. Don’t hesitate to make your CMA available to the Buyer.
Your Price should be based on the
Comparative Market Analysis
Don’t get caught in the following traps.
SELLERS COMMON PRICING OBJECTIONS
An Agent told me it was worth more! (maybe they wanted you to list with them
and thought if they told you they could get more you would go ahead and let them have the listing)
Our home is nicer than those other houses. (Is It? Here you would be losing
your objectivity remember your house is a commodity for sale compare them item for item,
condition for condition. BE OBJECTIVE!)
People always offer less than the asking price. (whether or not this is true
of false if you have the comparables to back up your price you can show that buyer in black and
white why your price is what it is!)
We can always come down on our price. (Bad strategy, remember you will get
your most activity in week 2,3,4,5 and after that prospective buyers will be few and far between.
Don’t miss out on that sale by overpricing. By overpricing buyers will just use your house as a comparison to houses they are really interested in that are priced within the market.)
My neighbor was able to get his price. (There are two factors to look at here. Sometimes people exaggerate the price they get for their property and sometimes they forget to mention that they paid $$$$ toward buyer’s closing costs, $$$$ toward buyers points, $$$$ into
repairs and upgrades which all affect their net)
We paid more than that when we bought our home!
(Unfortunately this is possible. Perhaps you bought your home in a sellers’ market or maybe you
paid too much. The CMA is the best tool you can use to establish your houses value on the market
you are in at the time you are trying to sell your house and that is what counts.)
We need more from the sale, we don’t have any equity! (unfortunately
more and more people are finding themselves in this situation because they did not put any money
down when they purchased the house and to qualify for the house they agreed to loans that for
the first 3,5,7 years all the monies they pay in toward their loan has gone to “INTEREST ONLY” so
that NO money has gone toward principal so they owe the same amount of money as they did
when they started (usually more) and with appreciation what it has been in the past few years it is impossible to break even. A house is worth what it is worth. The real factors that affect the value
of a house are LOCATION, LOCATION, LOCATION and then condition and amenities. The CMA Fair
Market Analysis will help you arrive at the value on the current market )
YOUR toughest and most important decision is setting the sales
price of your house. If you price it too high your house will sit
on the market, If you price it too low you cut into your profit.
You could hire an appraiser as one option. They will compare homes that have sold
in the last 6 months that are comparable to your home. They charge roughly $275- $475
for this service and if it is in your budget you will have your price for the house. But if it
isn’t in your budget then the following guidelines will help you arrive at a Fair Market
Value yourself. You may also request the help of a realtor. Just make sure that you are upfront with them and tell them you are planning to sell your home yourself. Some
realtors will help for free, others may require a small fee. Additional resources as you
will see are the internet and your city/county courthouse records.
There are Two Major Components that will determine the final outcome of your
house sale. The first component is your asking price and the second component is
your advertising and marketing of your house. If either of these components is neglected you may be in for a big let down in the time it takes to sell your house.
Don’t miss the section on Marketing and Advertising your house for SALE! Let’s look
first at establishing your asking price. FAIR MARKET VALUE Definition: The price at
which a bona fide seller is willing to sell and an able and willing buyer is willing to buy. Generally speaking, the fair market value is close to the price that similar homes have
sold for in your neighborhood within the past six months. Remember most homes sell
at market value.
You don't want to overprice the house because:
Many potential buyers won’t even look, thinking it’s out of their range.
Those buyers who do look are shopping by comparison and looking at your house
being overpriced may convince them to make a bid on a different house.
You will lose the freshness of the house's appeal after the first two to three weeks
of showings. After 21 days, demand and interest wane. House is considered “shopworn,” causing buyers to believe something is wrong with your house.
Overpricing will lengthen marketing time, and inevitably result in a lower selling price
than if house had been priced right from the beginning.
On the other hand, don't worry about pricing it a little too low because homes priced
below market value often will receive multiple offers, which will then drive up the price
to market.
Pricing is all about supply and demand. It's part art and part science, and there is no absolute method to putting a price on a property. Its all about what has sold recently
and what price a buyer was willing to pay.
How to Pull Comparable Listings and Sales
For your comparables you can check recent sales listings through AN ON-LINE VALUATION SERVICE, find one by using a search with Google, bing, or your favorite. You could try www.zillow.com (I checked this site out and it is fast and shows a good representation of houses around yours, I looked at others but this one was the easiest to use and had no strings attached.
I liked the way it showed houses with prices on a map around your house.) This is a good start but
you will need more information about the houses and how they compare to yours. For this you can
go online to your local GOV real estate assessors and tax records who provide tax assessments and sales information. Here you will see a description of the house, how many bedrooms, baths square
footage etc. so you can compare the house to your house. You need at least 4 that compare well
to your house and taking an average you can arrive at a good fair market value for your house.
You can also ask the Realtors® you interview. Figure in the condition of your house, additions or
special circumstances, but don't expect to sell for much more than the average price in your neighborhood.
Let’s take a step by step look at how to do a Comparable Market Analysis. Go to forms
and you can use the special form for entering your comparables.
CMA (Comparable Market Analysis): A comparison of similar properties in the same general area
that compares actual sold prices. A Real Estate Agent can generate a CMA, or in many cases you
can do it on your own.
**** Look at every similar home that was or is listed in the same neighborhood over the past six months and take the following into consideration
Location: You can't get away from this one. If your house is located in a desirable area that is in demand, you will be able to get a higher price than you can for the same house
in a less desirable area.
Condition: A house that has been better maintained and shows better will always sell for more than one that has had deferred (neglected) maintenance and needs work.
Desirable amenities: If a house has amenities that are currently popular in the market-
place, it will bring a higher price.
****The list should contain homes within a 1/4 mile to a 1/2 mile and no farther, unless
there are only a handful of comps in the general vicinity or the property is rural.
****Pay attention to neighborhood dividing lines and physical barriers such as major
streets, freeways or railroads, and try not compare houses from neighborhood to
another. Where I live, for example, identical homes in two different neighborhood in
close proximity can vary by $100,000 simply because of the amenities and prestige
of one of the neighborhoods. Perceptions and desirability have value.
Location, Location, Location . . .holds true
**** Compare similar square footage, within 10% up or down from the subject property,if possible.
SQUARE FOOT COST COMPARISON. This method is mostly used by appraisers but only
as part of their process and it is very difficult to figure out so I would not try to use a
sq footage approach to pricing. However you should not compare your house to houses
that are bigger or smaller than your house. Appraisers don't like to deviate more 25%
and prefer to stay within 10% of net square footage computations. If your home is
2000 sq. ft., comparable homes are those sized 1800 to 2200 sq. ft. so you should too. (The price per square foot rises as the size decreases and it decreases as the size increases, meaning larger homes have a smaller square foot cost and smaller homes
have a larger square foot cost. (A ranch has a higher sq. ft $$ than a 2 story)
SIMILAR AGE COMPARISONS. One neighborhood might consist of homes built in the
1950s while next door are house constructed from the 1990s. Values between the
two will differ.
Compare apples to apples.
THREE SOURCES OF PRICE COMPARISON
Houses currently on the market in you neighborhood. You can look them up on the internet
so you will have all the info to make a comparison to your house. It’s not a bad idea if you
can to go and look at some of these homes at least the ones most like your house. It is
good to know your competition and it can be very helpful when preparing your house for
sale.
SOLD houses and their price you pulled off the Internet. If you can compare the original list
price and the actual sales price. Pay special attention to days on the Market and if there
were any price reductions.
Withdrawn Listings. Find out if there were any houses that did not sell and were taken off
the market. Try to find out why these houses didn’t sell. Maybe ask the Realtors® you interview.
After you have collected all your data and entered it on your Comparable Market
Analysis sheet, the next step is to analyze the data based on market we are in.
For easy comparison purposes, let's say the last three comparable sales in your neighborhood were $150,000.
In a buyer's market, your sales price might allow some wiggle room for negotiation but
be strong enough (near the last comparable sale) to entice a buyer to tour your home. To
sell in this market, you might need to price your home at $149,900, settling for $145,000.
In a seller's market, you might want to add 10% more to the last comparable sale.
When there is little inventory and many buyers, you can ask more than the last
comparable sale and likely get it. So that $150,000 home might sell at $165,000 or more.
In a balanced or neutral market, you may want to initially set your price at the last comparable sale and then adjust for the market trend. For example, if the last sale closed three months ago, but the median price has edged upwards of 1% per month, pricing at $154,500 would make sense.
The truth of it is that it really doesn't matter how much money you think your house is worth. Nor does it matter what an agent thinks or ten other agents. The person whose opinion matters is the buyer who makes an offer. Pricing homes is part art and part
science.
It involves comparing similar properties, making adjustments for the differences among
them, tracking market movements and taking stock of houses on the market when you
are trying to sell your house, all in an attempt to come up with a range of value, an
educated guess. This method is the same way an appraiser evaluates a home. And no
two appraisals for the exact same property are ever exactly the same; however,
they are generally close to each other. In other words, there is no hard and fast price
tag to slap on your house. It's only an educated opinion and the current market will
ultimately dictate the sale price.
TERMS/PRICE
RELATIONSHIP
FAIR TERMS = FAIR PRICE
GOOD TERMS = GOOD PRICE
GREAT TERMS = GREAT PRICE
Comparing the houses on the market to establish sales price
The CMA PROCESS
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Copyright© Oct 1, 2009 forsalebyownerhow2 abef Blake Enterprises
Information deemed to be reliable although not guaranteed
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