Setting the "Right Price" for your Property
Understanding Market Value
Ultimately, the value of your home will be determined by the market. Basically, the market value is the amount buyers are willing to pay at the point in time that you want to sell. A Comparable Market Analysis (CMA) is the best way to judge market value. Avoid the urge to price your home based on considerations that do not affect its market value, such as:
• How much money you need to purchase your next home• How much you paid for your home
• How much you paid for improvements to your home
• The value of a similar home in a DIFFERENT community
• Area appreciation statistics
• The cost to build the same home today
• Personal attachment
ALWAYS REMEMBER, THE MARKET DETERMINES PRICE!
The Importance of Intelligent Pricing
An unrealistic asking price may prevent a prospect from even attempting to negotiate with you. Further, an overpriced home may attract a buyer expecting more than the property offers. If you desire a prompt sale, it is particularly important for your home to be listed at the most realistic price possible and to be in top-notch condition.
Price your home above market value and you will limit the number of interested buyers Price your home below market value and you will leave money on the table and limit your options in the event that your home does not sell in a reasonable timeframe.
Timing is extremely important in the real estate market. This graph illustrates the importance of placing your property on the market at a realistic price and terms from the very beginning. A property attracts the most excitement and interest from the real estate community and potential buyers when it is first listed; therefore, it has the highest chances of sale when it is new to the market.
Selling Price vs. Timing
If a property is priced above its market value and does not sell in the beginning, a seller will reduce the price in an effort to promote a faster sale. As more time goes by, the seller continues to reduce the price of the property until it sells much later, at a price considerably below market value. Pricing property realistically from the beginning in order to ensure the quickest sale. A house that is priced 10% over its actual market value is many times less likely to sell in the initial 30 days of marketing than one priced within 5% of its true value. Not only will an over-priced home take longer to sell, it is also likely to sell for less than its' actual value. This is due to the "discount" often associated with properties that have been on the market for a longer than average time.What is a Comparable Market Analysis?
A CMA is the best way to determine a reasonable asking price for your home. Our analysis looks at properties that are similar or comparable to your home. It takes into account all of the variables that may affect the value and marketability of your home.
How are comparable homes selected?
Properties located in close proximity to your home that have similar characteristics (i.e., lot size, square feet, number of bedrooms, baths, etc.) are researched. Since our goal is to obtain a balanced view of the market, we look at similar homes that fall into four basic groups:
• Currently listed homes identify the competition• Recently sold homes indicate what buyers are willing to pay
• Homes with sales pending point to the current demand for this type of home
• "Expired" homes failed to sell, suggesting what buyers will not pay at this time
Market Conditions and the Value of Your Property
No matter the condition or desirability of your home, its value will be affected by current market conditions. In a balanced market, the number of homes on the market is equal to the number of buyers (ie, supply & demand are in balance). In this market prices are stable and homes sell within a reasonable period. When the supply of homes is greater than the number of buyers, it is said to be a buyers market as there is pressure on the seller to reduce the price of properties to get them to sell. The flip side is a situation where there is a higher demand for houses than there is inventory available creating a sellers market. In this market, you are likely to get a stronger price for your home and be in a better negotiating position. Understanding current market conditions will better able you to position yourself as a seller.
In Summary
Good Realtors spend a lot of time and energy making sure they are current on market conditions and the up to speed on properties in the area. Determining the "right price" for your home is important for all the reasons stated here. Put our experience and knowledge to work for you to help you to determine a realistic asking price that will help to sell your home quickly and for top dollar.
