8 STEPS TO SELLING YOUR HOME
Step Two - Name Your Price
Pricing your home is not as simple as deciding how much you want for it and slapping on a price tag. The value of your home is determined by the follow:
- the current market
- the condition of your house
- what similar homes are selling for in the area
The value of your home is NOT determined by the following:
- what you originally paid for it
- what your neighbor, friends, co-workers say it's worth
- what you need or want it to be worth
- what it would cost to rebuild it today
In order to determine what your home is worth your agent will perform a Comparative Market Analysis, or CMA. To do this the agent will find a list of similar homes in and around your neighborhood that are currently for sale or that have sold in the last few months. She will then compile the data to show you a low and high price range of homes selling in your area. A good CMA will also include photos of the comparative homes as a visual example of what low end and high end homes look like. This will give you a good idea of how your home compares in the current market and will help you determine a fair asking price.
Just like your neighbors, friends and co-workers, your agent should not decide what your home is worth simply by looking at it. It is common for agents to make an educated guess based on the current market and the condition of your home, but it is in your best interest to ask that a CMA is performed.
If you want an extremely accurate price point you can have an appraisal done on your home. This is something you would arrange with a home appraisal professional and typically costs a few hundred dollars.
The housing market fluctuates like any other market, and like any other market, this fluctuation is caused by supply and demand.
When very few homes are on the market the supply is low and the demand will be high. This is known as a Seller's Market because the demand for homes will cause the prices to rise, thus being more profitable to the sellers. This will lead to more homeowners deciding to sell in order to reap the benefits of rising values.
As more people begin to sell the supply begins to go up until the market becomes saturated. Now the supply is high and the demand will lower, making it a Buyer's Market. During this phase of the market the buyers get to call the shots. Sellers will be offered much lower prices for their homes because the buyers know they have plenty more options if the sellers turn their offer down.
Pricing Too High
Pricing your home too high is one of the biggest mistakes that can be made when selling a home. Unless your home is truly unique, no one will pay above market value if they can purchase a similar home down the street for a fair price.
Studies show that homes priced 3% above market value take longer to sell. If your home sits on the market too long buyers will begin to think something is wrong with it, and they will avoid it. This generally leads to homeowners dropping the price of the home way below market value and receiving less of a profit than they would have had they priced it fairly.
This may seem like it would only be a problem in a buyer's market, why be worried about pricing too high in a seller's market when prices are rising anyways? In a seller's market, buyers know they will be paying a pretty penny for their home, so they are always in search of a deal. Pricing your home fairly will bring a flock of buyers to your door and could even result in a bidding war. This will have a much more beneficial outcome for you than pricing so high buyers simply walk on by.
If you are unsure about the current market and whether or not you should wait to sell, many agents will perform free CMAs to give you an idea of what your home is currently worth. Once you have that information you can determine a fair price and move on to step 3, preparing your home!