Pricing your home is one of the many important elements to achieve a good solid sale. Buyers who have been researching homes on the internet and touring homes of interest are very savvy. They know values and will select a home based on comparison to others on the market. The price you choose must be relative to what other homes on the market can be purchased for.
Sellers must understand that the value of their home must be justified, not just by your agent, but by the buyer, the appraiser and finally the lender. Pricing a home outside of the realm of reality will cause the home to stay on the market longer and become what Realtors call, "shop worn".
Factors that influence the price of your home are:
- Recent Sales
- Location of your Property
- The Condition of your Property
- Improvments/updating
- Condition of the market
Recent Sales:
Ideally, finding 3 homes identical to your home, that sold very recently in your neighborhood, on similar lots with similar improvements and upgrades would be a "perfect" comparison for your home. Of course this only happens in a perfect world. Instead, we look for homes that are as close to size, condition, age and location as your home. Sales that are no older than 6 months are good. If nothing has sold in 6 months, we go to a similar neighborhood to see if we can find at least 3 properties that will compare to your home.
The Condition of your Property:
Condition can make or break a sale. The Colorado Purchase Agreement allows time for the buyer to do inspections. Savvy buyers hire professional home inspectors to come in and look over your home. If the furnace has not been maintained, or the roof is in poor shape, it will be discovered. If your property is not in good condition, you can either fix it or adjust the price accordingly.
Improvements/updating:
Improvements are additional features in a home: expanded deck/patios, finished basements, special landscaping. Updating in older homes consists of all sorts of things: kitchen cabinet replacements, bathrooms, even the sewer line to the street can be considered "updated".
Condition of the Market:
How many homes are in direct competition with your home? The lower this number is, the better it is for the price of your home. If you are competing with new home construction or resales in the area, you will have to consider that the buyers are looking at all of these. Your home is part of the inventory on the market and will need to compare to these properties.
Taking the above factors into consideration, we will prepare a "comparitive market analysis" or "broker's price opinion". We examine your property and compare it to both homes currenty on the market (competition) and homes that have recently sold (comps).
Who determines the value?
The current market determines the value of your home.
Who sets the price on my home?
You the owner are in charge of setting the price. Your decision should be based on solid, facts and figures provided by your Realtor. Sellers should always be very careful not to select a listing agent based on their "estimate of value". A good Realtor should be choosen based on reputation, service and the proven success of their marketing plan. Realtors do not control the market.
Use Caution when Pricing:
Properties that are competively priced generally encourage reasonable offers, fair negotiations and a smooth closing. When your property goes on the market, there will be a "flurry" of activity. This activity comes from the buyers that have been patiently waiting for a new property to come on the market. Generally, these are the same buyers who have been looking at all of your competition. If your home appears on the market, all pretty and priced competitively, you stand a very good chance of selling quickly.
Sometimes sellers feel they need to "over-price" their property. This is based on the thought that "we can always lower our price". This strategy can also work against you. Many buyers are willing to do some negotitions, they are truly embarrassed and unwilling to even look at properties too far above their price range. If a seller uses the 'price it high strategy' and decides later to reduce the price, the "current days on the market" number is shown in the property listing in the Multiple Listing Service (MLS). Porperties with a high number on the MLS have a tendency to be over looked. Agents prefer to show the newest homes on the market first. This assumption is based on the theory that if a home is not sold quickly something is wrong with it! Homes that are listed for a long time are harder to sell.
Overpricing your home will cost you in terms of money, disappointment, missed opportunities and time.
Consider Going for the "Auction Effect"
When a home is priced "right" for the market, buyers get involved quickly. Sometimes multiple buyers get excited about a home and will bid the price up. Suddenly the seller has a competitive edge and can gain more than they originally thought. If you are willing to set a competititive price, you may be amazed at the number of buyers it can produce.
The Berkshire Group, Realtors has offered this advice to assist you in the process of determining a price for your home. Why not let us help you sell your home?
Setting the Price on Your Home